Product modularity and the contextual factors that determine its use as a strategic tool

Abstract

Product modularity has been associated with organizational advantages such as enhanced learning at the component level, rapid determination of consumer preferences and low barriers to entry across an industry, along with disadvantages such as lower levels of radical innovation, higher development costs and an inability to derive a competitive advantage on the basis of product superiority. This paper considers these advantages and disadvantages in terms of two contextual factors: the level of control that is exerted over the information structures and the degree of change across the information structures. The aim is to provide a starting point for discussing some of the contextual factors that affect the ability for product modularity to be used as a strategic tool.