The lead factory concept: benefiting from efficient knowledge transfer

Abstract

PurposeThe purpose of this paper is to compare two distinct network structures to determine and show which structure is more profitable. Specifically, it aims to show which factors render the lead factory concept advantageous.Design/methodology/approachBased on a simple, two‐stage model for prototype and serial production, the authors highlight factors that determine the relative advantages and disadvantages of the lead factory concept in comparison to an archetype network. The archetype network mirrors those networks that have not implemented special strategic plant roles.FindingsThe analysis shows that the lead factory concept benefits from an efficient knowledge transfer. Particularly, it is more profitable than the archetype network under the following conditions: there are a high number of production plants; the adaptation costs for implementing the transferred prototype from the lead factory to the plant are low; the manufacturing costs for the prototype are high; and the manufacturing processes are not highly specific or knowledge intensive.Originality/valueThe paper enables better understanding of the conditions under which the lead factory concept is advantageous for transferring knowledge within an intra‐firm network.