Efficiency and Innovativeness as Determinants of Design Architecture Choices

Abstract

This study analyzes why firms use both internal and external design, and attempts to understand the determinants of design architecture choices. It is based on the design literature that analyzes the compared benefits of internal, external, and combined design, and it mobilizes the concept of vertical architecture that designates at the level of the firm the configurations of transactional choices along the firm's value chain. The research methodology follows an exploratory multiple case study of fashion triads (manufacturer, designer, and retailer) theoretically sampled according to the design position (internal, external, or combination) relative to the manufacturer and retailer. Data were collected through face‐to‐face interviews and archival documents. The 31 triad cases were clustered into five industry architectures (IAs). The IAs are characterized as follows. Designer‐led architecture, in which the three players are independent, offers an advantage in terms of branding and creativity. Manufacturer‐led architecture, in which design is internal to the manufacturer, is recognized in terms of cost‐effectiveness and speed of development process. Retailer‐led architecture, in which design is internal to retail, offers advantages in terms of speed of development process and fit with market needs. Finally, the two hybrid architectures—licensing designer and designer retailer cobranding—with a combination of internal and external design are recognized in terms of cobranding and innovation. Through this process, the authors identify three determinants of design architecture choices (efficiency, level of fashion innovativeness, and innovation type) that can be grouped into two main opposing determinants: efficiency and innovativeness. Internal design offers greater efficiency, whereas external design provides increased innovativeness. Efficiency and innovation act in tension, there is no IA that offers both high efficiency and high innovativeness, there is a trade‐off effect. But the tension between efficiency and innovativeness can be reconciled by combining internal and external design. Unlike prior literature, this research analyzes vertical choices with regard to choosing among a menu of IAs instead of transactions, and focuses on a distinctly creative activity. External design also offers an “ingredient brand” that end customers may recognize. The authors propose additional research for the generalization of these results.