Download or read book Innovation in Modular Industries written by Dana Alice Sheffer and published by Stanford University. This book was released on 2011 with total page 192 pages. Available in PDF, EPUB and Kindle. Book excerpt: Product architectures are becoming increasingly modular, along with the industries that produce them. Instead of a single integrated firm designing and producing an entire product, clusters of firms design and produce individual components that are later integrated. While modularity has often been hailed as a catalyst for innovation, I show that modularity can hinder some kinds of innovation. Within a modular system, innovations that are limited to individual modules without altering interfaces and processes (modular innovations) thrive, while innovations that cross module boundaries and alter interfaces and processes (integral innovations) are stifled. In a study of implementations of twenty three different technologies in one hundred and twelve US buildings, I demonstrate that the odds for integral innovations to be implemented are 84% lower than for modular innovations, even after accounting for technology costs and other factors. The primary underlying mechanism is that integral innovations involve a loss of the embedded coordination that standardization provides. Thus, I investigate supply chain integration as a moderator and a substitute for the lost coordination. I compare high integration (both vertical and horizontal), medium integration (either vertical or horizontal), and low integration (neither vertical nor horizontal). I demonstrate that as integration increases, so does the likelihood of implementing integral innovations. In fact, the odds of implementation of integral innovations increase by 542% in supply chains characterized by high levels of integration. Thus, I shed light on the relationship between an innovation's alignment with existing industry structure and standards and the complex moderating effect of supply chain integration in modular industries. In addition, I develop a comprehensive analytical framework to explain innovation diffusion in the construction industry -- integrating the supply chain learning and coordination issues discussed above with high levels of demand fluctuation, competitive bidding by trade, and broken agency.