Beyond Product Architecture: Division of Labour and Competence Accumulation in Complex Product Development

66 Pages Posted: 10 Apr 2012

See all articles by Markus C. Becker

Markus C. Becker

University of Southern Denmark

Francesco Zirpoli

Università Ca' Foscari Venezia

Date Written: June 6, 2011

Abstract

This paper considers the trade-off between leveraging external sources of innovation by outsourcing design and engineering activities and the ability to develop internal product development competences. The trade-off arises because the division of labor within and across firms' boundaries has a crucial role in shaping competence development processes, especially because the division of labor also influences opportunities for learning by doing. In new product development projects, learning by doing appears to be both a key determinant of competence development and a difficult-to-substitute form of learning. While the division of development tasks is often considered as guided by product architecture, we show that by decoupling the decisions concerning the product architecture and the allocation of development tasks, firms can realize the benefits of outsourcing such tasks while developing new internal competences. Drawing on a longitudinal case study in the automotive industry, we also identify a new organizational lever for shaping competence development paths and for designing firm boundaries. This lever consists in alternating different task allocation schemes over time for different types of development projects. We show why this is a novel solution, what its underlying logic is, and how it enables alleviating the trade-off between the benefits of leveraging external sources of innovation and the opportunities for competence development provided by in-house design and engineering. We discuss implications for theories of organizational boundary design and innovation management.

Keywords: innovation management, organizational boundaries, outsourcing, product architecture, modularity, new product development, template process, automotive industry, Fiat

JEL Classification: L22, L62, M10, O32

Suggested Citation

Becker, Markus C. and Zirpoli, Francesco, Beyond Product Architecture: Division of Labour and Competence Accumulation in Complex Product Development (June 6, 2011). Department of Management, Università Ca' Foscari Venezia Working Paper No. 3/2011, Available at SSRN: https://ssrn.com/abstract=2037863 or http://dx.doi.org/10.2139/ssrn.2037863

Markus C. Becker

University of Southern Denmark ( email )

Campusvej 55
Odense, 5000
Denmark

Francesco Zirpoli (Contact Author)

Università Ca' Foscari Venezia ( email )

Cannaregio 873
Venice, Veneto 30121
Italy

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