Modularity in New Market Formation: Lessons for Technology and Economic Policy and Competence-Based Strategic Management

Ron Sanchez, Chang Chieh Hang

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    In this paper we appraise the ways in which use of closed-system proprietary product architectures versus open-system modular product architectures is likely to influence the dynamics and trajectory of new product market formation. We compare the evolutions of new markets in China for gas-powered two-wheeled vehicles (G2WVs) based (initially) on closed-system proprietary architectures and for electric-powered two-wheeled vehicles (E2WVs) based on open-system modular architectures. We draw on this comparison to suggest ways in which the use of the two different kinds of architectures as the basis for new kinds of products may result in very different patterns and speeds of new market formation. We then suggest some key implications of the different dynamics of market formation associated with open-system modular architectures for both the competence-based strategic management (CBSM) of firms and for technology and economic development policies of governments.
    Specifically, we suggest how the use of open-system modular product architectures as the basis for new products is likely to result in dynamics of new market formation that call for new approaches to the strategic management of innovation and product creation. We also suggest technology and economic development policies favoring use of open-system modular architectures may stimulate new market formation and related economic development by providing platforms for accelerating technology development and dissemination, facilitating the formation of an industrial base of assemblers and component suppliers, assisting new firms in building customer relationships, enabling more geographically diffused economic development within countries, and facilitating development of export markets. We also suggest directions for further research into the potential for open-system modular product architectures to enable bottom-of-the-pyramid innovation processes, frugal engineering in developing economies, and development of low-cost product variations more generally.
    Original languageEnglish
    Title of host publicationMid-Range Management Theory : Competence Perspectives on Modularity and Dynamic Capabilities
    EditorsRon Sanchez, Aimé Heene, Seckin Polat, Umut Asan
    Number of pages35
    Place of PublicationBingley, UK
    PublisherEmerald Group Publishing
    Publication date2017
    ISBN (Print)9781787144040
    ISBN (Electronic)9781787144033, 9781787149236
    Publication statusPublished - 2017
    SeriesResearch in Competence-Based Management


    • Modularity
    • Industry standards
    • Technology development
    • Economic development policy

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