Modularity, Industry Life Cycle and Open Innovation

Muge Ozman

Abstract


This paper discusses the incentives behind, and effects of open innovation in different stages of an industry life cycle. It argues that in the beginning of an industry life cycle, open innovation policies usually serve the dual purpose of exploring distant knowledge sources, and exploiting potential network effects to strengthen the installed base of a technology. In the later phases of the industry life cycle, after the emergence of a dominant design, open innovation incentives and effects depend largely on the product system architecture. Modularity at different parts of the product system is an important dimension which influences the types of open innovation strategies implemented by firms.

Keywords


Open innovation;modularity;network effects

Full Text:

PDF [en]

References


ABERNATHY, W.J and Utterback, J.M (1978). Patterns of Industrial Innovation, Technology Review, 80(7): 40-47.

ALLEN, R. (1983). Collective Inventio n.Journal of Economic Behavior and Organization. 4: 1 -24.

ALEXANDER, C. (1964) .Notes on the Synthesis of Form. Cambridge, Massachusetts: Harvard University Press.

ARORA, A. and Gambardella, A. (1990). Complementary and External Linkages: The Strategies of the Large Firms in Biotechnology. Journal of Industrial Economics, 361-379.

ARTHUR, B. (2009). The Nature of Technology. Free Press.

ARTHUR, B. (1989). Competing Technologies, Increasing Returns and Lock in by Historical Events, The Economic Journal, 99: 116-131.

AYLEN, J. (2010). Open versus closed innovation: development of the wide strip mill for steel in the United States during the 1920s, R&D Management, 40(1): 67-80.

BALDWIN, C. Y. and Clark, K. B. (2000) .Design Rules: the Power of Modularity Volume 1. MIT Press.

BALDWIN, C. Y. and Clark, K. B. (1997) .Managing in the Age of Modularity. Harvard Business Review Sept/Oct: 81 -93.

CHESBROUGH, H. (2003) .Open Innovation: The New Imperative for Creating and Profiting from Technology. Harvard Business School Press, Cambridge, MA.

CHESBROUGH, H. and A. K.Crowther (2006). Beyond high tech: early adopters of open innovation in other industries, R&D Management, 36, 3 (June): 229-236.

CHRISTENSENJ. F., Olesen, M. H. and KjaerJ.S. (2005). The Industrial Dynamics of Open Innovation Evidence from the transformation of consumer electronics. Research Policy, 34(10): 1533-1549.

COHEN and Levinthal (1990). Absorptive capacity: A new perspective on learning and innovation, Administrative Science Quarterly, Volume 35, Issue 1 pg. 128-152.

CLARK, K. B.; Fujimoto, T. (1991) .Product development performance: strategy, organization and management in the world auto industry. Boston, Mass.: Harvard Business School Press.

DAVID, P. (1985). Clio and the Economics of Qwerty, The American Economic Review, 75(2), Papers and Proceedings of the Ninety-Seventh Annual Meeting of the American Economic Association, pp : 332-337.

DODGSON, M., Gann, D., & Salter, A. (2006). The role of technology in the shift towards open innovation: The case of Procter & Gamble. R&D Management, 36(3), 333-346.

DYER, J.H. and Nobeoka, K. (2000) . Creating and Managing a High Performance Knowledge Sharing Network: The Toyota Case. Strategic Management Journal, 21: 345-67.

ECONOMIDES, N., and Salop, S. C. (1992) .Competition and Integration among Complements, and Network Market Structure. Journal of Industrial Economics, 40(1): 105-123.

EVANS D.S., Hagiu, A. and Schmalensee, R. (2006) .Invisible Engines: How Software Platforms Drive Innovation and Transform Industries, Massachusetts Institute of Technology, MIT Press.

FLEMING L. and Sorenson, O. (2003) .Navigating the Technology Landscape of Innovation. MIT Sloan Management Review, 44(2):15-23.

GARUD, R. and Kumaraswamy, A. (1993) .Changing competitive dynamics in network industries: An exploration of Sun Microsystems' open systems strategy. Strategic Management Journal, 14: 351-369.

GAWER, A. and Cusumano, M. (2002) Platform Leadership, Harvard Business School Press.

GASSMANN, Oliver (2006). Opening up the innovation process: towards an agenda. R&.D Management, 36(3): 223-226.

HARGADON, A. and Sutton, R. (1997). Technology brokering and innovation in a product development firm. Administrative Science Quarterly, 42(4): 716-749.

HAGEDOORN, J. (1993) .Understanding the Rationale of Strategic Technology Partnering: Inter-organizational Modes of Cooperation and Sectoral Differences. Strategic Management Journal, 14: 371-85.

HENDERSON, R. M., and Clark, K. B. (1990). Architectural innovation: The reconfiguration of existing product technologies and the failure of established firms. Administrative Science Quarterly, 35(1): 9-20.

HILL, C. (1997). Establishing a Standard: competitive strategy and technological standards in winner-take-all industries, Academy of Management Executive, 11(2): 7-25.

KATZ M. L., and Shapiro C. (1985) .Network externalities, competition, and compatibility. American Economic Review 75: 424-440.

KEMP, S. (2001) The Ultimate History of Video Games, Three Rivers Press, New York.

LANGLOIS, R. N. and Robertson, PL (1992) .Networks and innovation in a modular system: lessons from the microcomputer and stereo component industries. Research Policy, 21: 297313

LEONARD, D. (1998) Wellsprings of Knowledge, Harvard Business School Press.

MANN, C. (2009). Beyond Detroit: On the Road to Recovery, Let the Little Guys Drive, Wired, 17(6).

MARCH, J. (1991) .Exploration and Exploitation in Organizational Learning. Organization Science, 2: 71-87.

MEYER, M.H. P. Tertzakian, and J.M. Utterback (1997) .Metrics of Managing Product Development. Management Science, 43(1):88- 111.

MIKKOLA, J. H. (2003) .Modularity, component outsourcing, and inter-firm learning. R&D Management, 33(4): 439-454.

NAKAMURA and Ohashi, (2008). Effects of User Innovation on Industry Growth: Evidence from Steel Refining Technology, Working Paper series no:47, National Institute of Science and Technology Policy available at: www.nistep.go.jp/achiev/ftx/eng/dis047e/pdf/dis047e.pdf

NELSON, R. and Winter, S. (1982) .An Evolutionary Theory of Economic Change, Cambridge: Harvard University Press.

PAVITT, K.(2005) .Innovation Processes, in J. Fagerberg, D.C. Mowery and R.R. Nelson (eds.) The Oxford Handbook of Innovation, pp 86-114, Oxford, UK? Oxford Uni-versiy Press.

PORTER, M. (1998). Competitive Advantage: Creating and Sustaining Superior Performance, Free Press.

POWELL, W.W., Koput, K.W. and Smith-Doerr, L. (1996) .Interorganizational Collaboration and the Locus of Innovation: Networks of Learning in Biotechnology. Administrative Science Quarterly, 41:116-145.

ROSENBERG, N. (1994).Exploring the Black Box : Technology, Economics and History, Cambridge, Cambridge University Press.

ROSENKOPF, L. and Tushman, M.L. (1998) The devolution of Community Networks and Technology: Lessons From the Flight Simulation Industry. Industrial and Corporate Change, 7: 311-46.

ROWLEY, T., Behrens, D. and Krackhardt, D., (2000) Redundant Governance Structures: An Analysis of Structural ad Relational Embeddedness in the Steel and Semiconductor Industries, Strategic Management Journal, 21:369-86.

SANCHEZ and J.T. Mahoney (1996) .Modularity, flexibility, and knowledge management in product and organizational design., Strategic Management Journal, 17, Winter special issue: 63-76.

SANCHEZ, M. an Collins, R.P. (2001) .Competing and Learning in Modular Markets. Long Range Planning, 34, 645-67.

SANDERSON S. and M. Uzumeri (1995) .Managing product families: The case of the Sony Walkman. Research Policy, 24(5): 761-782.

SCHILLING, M. (2008). Strategic Management of Technological Innovation, Mc Graw Hill, Singapore.

SCHILLING, M. A. (2000) . Toward a General Modular Systems Theory and Its Application to Inter-firm Product Modularity. Academy of Management Review, 25(2): 312-334.

SCHILLING, M. (1999) .Winning the standards race: Building installed base and the availability of complementary goods. European Management Journal, (17): 3, 265-274.

SHAN, W, G. Walker; B. Kogut (1994) Interfirm Cooperation and Startup Innovation in the Biotechnology Industry Strategic Management Journal, 15(5): 387-394.

SIMON, H. (1962) The Architecture of Complexity. Proceedings of the American Philosophical Society, 106(6): 467-82.

SOBRERO, M. and Roberts, E. (2002) .Strategic management of supplier-manufacturer relations in new product development. Research Policy, 31(1):159.

ULRICH (1995) The Role of Product Architecture in the Manufacturing Firm. Research Policy, 24: 419-40.

UZZI, B. (1997).Social Structure and Competition in Interfirm Networks: The Paradox of Embeddedness, Administrative Science Quarterly, 42(1): 35-67.

UTTERBACKJ., Vedin, B.A., Alvarez, E., Ekman, S., Sanderson, S., Tether, B. and Verganti, R. (2006) .Design Inspired Innovation. World Scientific Publishing.

VON HIPPEL, Eric (1976) The Dominant Role of Users in the Scientific Instrument Innovation Process. Research Policy 5(3):212-39.

WALKER, G., Kogut B. and Shan W. (1997) Social Capital Structural Holes and the Formation of an Industry Network, Organization Science, 8(2): 109.

WEST, J. and Scott G. (2006). Challenges of open innovation: the paradox of firm investment in open-source software. R&D Management, 36, (3): 319-331.

WOMACK, J.P., Jones, D. T. and Roos, D. (1990) The Machine That Changed the World : The Story of Lean Production. Scribner Press.




DOI: http://dx.doi.org/10.4067/S0718-27242011000100003



Copyright (c)



2017 © Universidad Alberto Hurtado - Facultad de Economía y Negocios. 
Erasmo Escala 1835 - Santiago, Chile.
Economic Analysis Review | Observatorio Económico | Gestión y Tendencias 

Journal Supported by Chimera Innova Group