How Modularity Constrains or Enables Innovation

Abstract

Our research question focuses on modularity, and how product novelty and supplier involvement influence new product performance. Based on survey data collected from the medical technologies industry, we find firms are faced with the following challenge: Modular designs can be effective in technologically mature markets, where their usage is positively related to increased product performance. However, under some circumstances, the use of modular designs may decrease technological novelty, which can be problematic in fast-changing environments where such novelty is important. At the same time, increased supplier involvement may be positively associated with technological novelty of modular designs. Such trade-offs are important in fast- changing markets in which effective collaboration with suppliers can be an important driver of success. As such, the extent to which modularity is emphasized needs to be considered as a function of the importance of technological novelty and to what extent the firm can draw on supplier knowledge as a source of innovation.