Modularity in Production and Firm Relative Positional Advantage: Evidence from the Global Automobile Industry in China

Abstract

This study investigates modularization and its impact on cost, speed to market and product quality (firm relative positional advantage) in the world’s largest car market. The research findings support the view that modularization is an important factor in the Chinese auto industry. It has a positive impact on these variables that constitute firm relative positional advantage. The study also shows that knowledge sharing and physical proximity partially moderate the relationship between the degree of modularization and firm relative positional advantage variables: cost, speed to market and product quality. The study contributes to the literature by showing modularization as an important competitive strategy.