Integrating suppliers into new product development (NPD) projects offers manufacturers the potential for substantial improvements in the new product being designed. However, it also creates significant inter-organizational integration diseconomies that can negatively affect the manufacturing cost and performance of the designed product. We propose that these diseconomies can be reduced to the extent that the manufacturer is able to design modular products — i.e., it has a modular design competence (MDC). We also suggest that such an effect tends to become weaker for high levels of product and process innovation. We test our hypotheses on an international sample of 165 NPD projects using hierarchical linear regression. Our results provide support for the moderation effect of MDC and partial support for the weakening of this effect under high product and process innovation. We discuss the implications for the literature of buyer-supplier relationships in NPD, inter-firm modularity and product-process-supply chain design as well as practice.