Modularity and Innovation in Complex Systems

Sendil K. Ethiraj () and Daniel Levinthal ()
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Sendil K. Ethiraj: University of Michigan Business School, 701 Tappan Street, University of Michigan, Ann Arbor, Michigan 48109
Daniel Levinthal: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Management Science, 2004, vol. 50, issue 2, 159-173

Abstract: The problem of designing, coordinating, and managing complex systems has been central to the management and organization literature. Recent writings have tended to offer modularity as at least a partial solution to this design problem. However, little attention has been paid to the problem of identifying what constitutes an appropriate modularization of a complex system. We develop a formal simulation model that allows us to carefully examine the dynamics of innovation and performance in complex systems. The model points to the trade-off between the destabilizing effects of overly refined modularization and the modest levels of search and a premature fixation on inferior designs that can result from excessive levels of integration. The analysis highlights an asymmetry in this trade-off, with excessively refined modules leading to cycling behavior and a lack of performance improvement. We discuss the implications of these arguments for product and organization design.

Keywords: modularity; complex systems; innovation; nearly decomposable systems (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (177)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:50:y:2004:i:2:p:159-173

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