Special Issue on Design and Development: Sourcing By Design: Product Complexity and the Supply Chain
By Sharon Novak, Steven D. Eppinger. Management Sciences, 2001
457 citations recorded by the source corpus.
This paper focuses on the connection between product complexity and vertical integration using original empirical evidence from the auto industry. A rich literature has addressed the choice between internal production and external sourcing of components in the auto industry. More recent literature has developed the concept of product architecture as another choice variable that may be one of the important contributors to product complexity. In this paper, we connect these two important decisions and study them jointly. We use the property rights approach to argue that complexity in product design and vertical integration of production are complements: that in-house production is more attractive when product complexity is high, as firms seek to capture the benefits of their investment in the skills needed to coordinate development of complex designs. We test this hypothesis with a simultaneous equations model applied to data from the luxury-performance segment of the auto industry. We find a significant and positive relationship between product complexity and vertical integration. This has implications for optimal incentive structures within firms, as well as for interpreting firm performance.
Subfields: Management of Technology and Innovation, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/b5a0cba99de066764a3f7e9c2bdc1874abff0b39
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Management of Technology and Innovation
In Strategy and Management
Citations in the corpus
- The Mirroring Hypothesis: Theory, Evidence and Exceptions (2016, background): “…in the same system: more complex and/or novel components generally are associated with higher levels of communication between buyers and suppliers (Monteverde and Teece, 1982; Novak and Eppinger, 2001; Takeishi, 2001, 2002; Cantamessa et al., 2006; Cabigiosu and Camuffo, 2012: Furlan et al., 2014).”
- What Firms Make vs. What They Know: How Firms' Production and Knowledge Boundaries Affect Competitive Advantage in the Face of Technological Change (2012, unknown): “Monteverde and Teece, 1982; Walker and Weber, 1984; Argyres, 1996; Novak and Eppinger, 2001;”
- Economic Foundations of Strategy (2004, unknown): “…2001; Dyer, 1996, 1997; Lieberman, 1991; Masten, 1984; Masten, Meehan and Snyder, 1989, 1991; Monteverde, 1995; Nickerson, Hamilton and Wada, 2001; Novak and Eppinger, 2001; Pisano, 1989; Richardson, 1993; and Stuckey, 1983]; and • Business History [E.g., Argyres and Liebeskind, 1999; and…”