The Impact of Platform Providers’ Knowledge on Interfirm Division of Labor: The Case of the Mobile Phone Industry

Abstract

To achieve higher performance in the interfirm division of labor, it is crucial to understand how to assign decision-making rights properly. Past research indicates that decision-making rights between a firm and its partner are determined by how much knowledge the firm and partner have. Indeed, the more knowledge a firm has compared with its partner, the more decision-making rights should be assigned to it. On the contrary, the more knowledge the firm’s partner has, the more decision-making rights should be assigned to the firm’s partner. This study extends the above scope of analysis and examines the case of a firm and its partner relying on third-party knowledge. From the point of view of interfirm division of labor, how should they assign decision-making rights to pursue higher performance? We examined 50 smartphone product development projects carried out by brand firms and Taiwanese contract manufacturers from 2012 to 2014 and found greater performance enhancement when both aimed to acquire different platform provider knowledge for their decision-making rights, based on their respective business-oriented activities. At the same time, decision-making rights induce opportunism and a disincentive effect that should be controlled by means of close interaction and communication.