Abstract
This chapter seeks to identify the set of conditions under which the mirroring hypothesis holds, proposing that modular product architecture leads to organizational modularity (i.e., supplier disintegration). The contradictory results on the mirroring hypothesis in the extant literature call for a more holistic analysis of the issue. To this end, this chapter develops a multi-objective mathematical model, allowing for the simultaneous examination of potentially influential factors, including those claimed to be neglected by the mirroring hypothesis. The findings reveal that modular product architecture does not necessarily lead to supplier disintegration, but that its effect is contingent on a firm's priorities.
TopIntroduction
Operational factors indicating an ideal supplier integration level has been under investigation for a while. Modularity theory (Baldwin, 2008) explains this issue at task level; accordingly, firms should integrate with their suppliers to the extent that their tasks are interdependent with the tasks of their suppliers. Since technical interdependencies across components largely determine the degree of task interdependencies with suppliers, product design architecture is an important determinant of the ideal supplier integration level.
Product modularity (PM) is the design property of products showing the decoupling degree between the product components (Schilling, 2000). Modular product (high PM level) contains few spatial, structural, and material interdependencies across components (Sosa et al., 2003) because each component is responsible for one separate product function (Ulrich, 1995). The standardized interfaces embed the remaining interdependencies across components in the codified form (Sanchez & Mahoney, 1996). In contrast, integral product (low PM level) is composed of tightly coupled components. Components are jointly responsible for implementing each product function. Thus, the design change in one component entails the significant changes in other components (Ulrich, 1995).
Organizational modularity (OM) indicates the decoupling degree between organizational units to perform organizational functions. Colfer and Baldwin (2016) define three analysis levels for OM, which are within-firm, across-firm, and open and community-based projects. The second one, across-firm, refers to the organizational decoupling degree (OM level) when product is developed by at least two firms. Therefore, the decoupling degree between a firm and its suppliers is analyzed at across-firm level. Likewise, many previous studies (Furlan et al., 2014; Sorkun, 2016; Zirpoli & Becker, 2011) used the supplier integration level to measure the OM level at across-firm level. Accordingly, while supplier integration indicates low OM, supplier disintegration indicates high OM.
“The mirroring hypothesis” establishes a positive link between PM and OM (Colfer & Baldwin, 2016). The reduced technical interdependencies in modular products decrease the coordinative needs across firms, enabling them to form modular organizations (high OM) (Cabigiosu & Camuffo, 2012; Sanchez & Mahoney 1996). Fine et al. (2005) show the positive effect of PM on OM in supply chains, stating that modular products tend to be produced by modular supply chains.
However, the mirroring hypothesis has received criticisms because of its overlooking other relevant operational factors. According to the papers assuming critical position, the relationship between PM and OM is not straightforward as hypothesized. Modular product may encourage supplier disintegration for reducing coordination costs but other operational factors such as logistics (Jacobs et al., 2007; Howard & Squire, 2007), innovation (Lau & Yam, 2005; Sabel & Zeitlin, 2004), and production efficiency (Frigant & Talbot, 2005; Tiwana, 2008) require supplier integration (low OM).
The contradictory findings on the PM-OM relationship require an analysis at a larger scope. The research based on single empirical setting may not be sufficient to make conclusive judgments. This study corroborates the viewpoint that specifying under which conditions the mirroring hypothesis holds is more important than debating whether it holds or not (Burton & Galvin, 2018). This acknowledgement calls for comprehensive analytical studies that show the big picture by considering many contingent factors together (Sorkun & Furlan, 2017). Hence, this chapter aims to uncover the set of conditions that modular product leads to supplier disintegration.
Key Terms in this Chapter
Modularity: A system design feature that shows the degree to which the system components are reconfigurable and decomposable owing to standardized interfaces.
Multi-Objective Optimization: A mathematical method that aims to find the optimal solution for problems involving multiple objectives.
Experimental Study: A quantitative research method that allows to see the effects of changes in the variables of interest by keeping other relevant variables under control.
Nondominated Solutions: A set of solution points identified in multi-criteria decision-making problems that are not less preferable than other solution points at least in one criterion.
Mirroring Hypothesis: A theoretical proposition claiming that the design architecture of organizations mirrors the design architecture of products developed by them.
Multi-Criteria Decision Making: A set of analytical techniques that support decisions for which multiple criteria need to be considered.
Supplier Integration: The degree to which firms are collaborating with their suppliers, such as in idea generation, product concept development, new product development, market testing, and large-scale production.