Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 7 The Value Structure of Technologies, Part 2: Technical and Strategic Bottlenecks as Guides for Action

23 Pages Posted: 25 Oct 2018

See all articles by Carliss Y. Baldwin

Carliss Y. Baldwin

Harvard Business School, Finance Unit

Date Written: October 9, 2018

Abstract

The purpose of this chapter is to present analytic tools based on functional maps that can be used to identify investment opportunities and to formulate strategy in large, evolving technical systems. I argue that the points of value creation and value capture in a technical system are the system’s bottlenecks. Bottlenecks arise first as important technical problems to be solved. Once the problem is solved, the solution in combination module boundaries and property rights can be used to capture a stream of rents.

In this chapter I extend the functional mapping techniques developed in the last chapter to locate technical and strategic bottlenecks, modules, and property rights. I then show how these analytic tools can be used to construct narratives explaining the dynamics of three nascent technical systems: early aircraft, high-speed steel in machine tools, and container shipping.

Suggested Citation

Baldwin, Carliss Y., Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 7 The Value Structure of Technologies, Part 2: Technical and Strategic Bottlenecks as Guides for Action (October 9, 2018). Harvard Business School Research Paper Series No. 19-042. Available at SSRN: https://ssrn.com/abstract=3270955 or http://dx.doi.org/10.2139/ssrn.3270955

Carliss Y. Baldwin (Contact Author)

Harvard Business School, Finance Unit ( email )

Boston, MA 02163
United States

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