Modularity and Economic Organization: Concepts, Theory,Observations, and Predictions

Ron Sanchez, Joseph T. Mahoney

    Research output: Working paperResearch

    Abstract

    This paper addresses modularity as a basis for organizing economic activity. We first define the key concepts of architecture and of modularity as a special form of architecture. We then suggest how modular systems of all types may exhibit several properties of fundamental importance to the organization of economic activities, including greater adaptability and evolvability than systems that lack modular properties. We draw extensively on our original 1996 paper on modularity and subsequent research to suggest broad theoretical implications of modularity for (i) firms' product strategies and the nature of product market competition, (ii) the organization designs firms may adopt and the industry structures that can result when significant numbers of firms adopt modular product architectures, and (iii) learning processes and knowledge structures at the firm and industry levels in modular product markets. We also discuss an evolutionary perspective on modularity as an emergent phenomenon in firms and industries. We explain how modularity as a relatively new field of strategy and economic research may provide a new theoretical perspective on economic organizing that has significant potential for achieving important integrations of microeconomic and macroeconomic theory. We suggest some areas for further research that may be especially fruitful in this regard.
    Original languageEnglish
    Place of PublicationChampaign
    PublisherUniversity of Illinois
    Number of pages29
    Publication statusPublished - 2012
    SeriesCollege of Business Working Papers
    Number12-0101

    Cite this

    Sanchez, R., & Mahoney, J. T. (2012). Modularity and Economic Organization: Concepts, Theory,Observations, and Predictions. Champaign: University of Illinois. College of Business Working Papers, No. 12-0101
    Sanchez, Ron ; Mahoney, Joseph T. / Modularity and Economic Organization : Concepts, Theory,Observations, and Predictions. Champaign : University of Illinois, 2012. (College of Business Working Papers; No. 12-0101).
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    Modularity and Economic Organization : Concepts, Theory,Observations, and Predictions. / Sanchez, Ron; Mahoney, Joseph T.

    Champaign : University of Illinois, 2012.

    Research output: Working paperResearch

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