A Limit to Outsourcing Complexity: Coordination vs. Cooperation in the Airbus A350 Program

37 Pages Posted: 14 Nov 2015

See all articles by Oliver Baumann

Oliver Baumann

University of Southern Denmark - Strategic Organization Design Unit (SOD)

Markus C. Becker

University of Southern Denmark

Isabel Dörfler

Ludwig Maximilian University of Munich (LMU) - Center for Digital Technology and Management

Date Written: November 13, 2015

Abstract

Designing complex product systems across firms poses significant organizational challenges. While much research has focused on how interdependencies between system components can hamper the integration of collective efforts, the fact that complex systems consist of multiple hierarchic levels has received less attention. A basic decision that firms face, however, is how much complexity to outsource. The hierarchic nature of complex systems can guide this decision – which system levels to design in-house, and which to contract out? In this paper, we use an in-depth study of the aircraft manufacturer Airbus’ A350 program to understand the organizational consequences of this decision. We find that allocating higher-level design tasks to suppliers entails a tradeoff: on the one hand, it shifts the locus of dealing with complexity and reduces the outsourcing firm’s “coordination load” – its share in ensuring the alignment of actions; on the other hand, it can deteriorate cooperation within the supplier network and thus increase the firm’s “cooperation load” – its burden of aligning interests. Outsourcing higher-level design tasks, we argue, can backfire by creating conditions that are toxic to dealing effectively with complexity: (a) the supply network becomes more stratified, requiring competitors to cooperate while changing bargaining positions in adverse ways; (b) suppliers have to absorb the uncertainty of unstable design requirements, which reinforces the negative implications of (a). If organizing effectively implies reconciling specialization with coordination and cooperation, this tradeoff may impose a limit to the interfirm collaboration in complex systems design.

Keywords: organization design, complex product systems, supplier relations, outsourcing, product development, organizational problems

JEL Classification: L22, M10, O31, O32

Suggested Citation

Baumann, Oliver and Becker, Markus C. and Dörfler, Isabel, A Limit to Outsourcing Complexity: Coordination vs. Cooperation in the Airbus A350 Program (November 13, 2015). Available at SSRN: https://ssrn.com/abstract=2690164 or http://dx.doi.org/10.2139/ssrn.2690164

Oliver Baumann (Contact Author)

University of Southern Denmark - Strategic Organization Design Unit (SOD) ( email )

Campusvej 55
Odense, DK-5230 M
Denmark
+45-6550-4433 (Phone)

HOME PAGE: http://www.sdu.dk/staff/oliv.aspx

Markus C. Becker

University of Southern Denmark ( email )

Campusvej 55
Odense, 5000
Denmark

Isabel Dörfler

Ludwig Maximilian University of Munich (LMU) - Center for Digital Technology and Management ( email )

Munich
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
199
Abstract Views
1,160
rank
181,110
PlumX Metrics