This study explores whether, to what extent, and under which conditions modular products are associated with modular organizations (the “mirroring” hypothesis). We analyze the product and organizational architectures of three firms in the air conditioning industry through an original data set of 100 components and supply relationships. Applying a variety of regression methods, we show that, under the condition of product architecture stability at the component level, supplier relations for loosely coupled components are characterized by less information sharing, which implies that the degree of coupling of product components varies directly with the degree of coupling of organizations (the “mirroring” hypothesis). Also, the performance of supply relationships depends on the amount of buyer–supplier information sharing but not on the degree of component modularity, which supports the relational view and confirms that product modularity does not have unambiguous effects on organizational performance. Moreover, the degree of component modularity negatively moderates the impact of buyer–supplier information sharing on supplier-relationship performance, which confirms that component modularity works as an ex ante, embedded substitute for high-powered interorganizational integration mechanisms. Finally, contingent on firms' strategies, organizational structures, and capabilities, we argue that at the firm level, higher product modularity may be associated either with less information sharing with suppliers, which implies that the mirroring effect might hold also at the firm level, or with more information sharing with suppliers, which implies that there may be increasing returns to modularity in design efforts because of interorganizational integration (the “complementarity” hypothesis).

This study investigates how component technological change affects the relationship between product modularity and organizational modularity (the across-firm mirroring hypothesis). Studying the air conditioning industry, we show that the across-firm mirroring hypothesis does not hold for technologically dynamic components and the associated supply relationships. In this case, the mirror gets ‘misted up’ with buyers and suppliers having recourse to information sharing even in the presence of highly modular components. Our study contributes to the debate on the organizational implications of modularity and its ramifications for the theory of the firm

In the last two decad es, the au to industr y has shown a steady increase of vehicle development outsourcing and a shift of both pr oduct developm ent tasks and knowledge from car makers to suppliers. This trend has increased the interest toward product m odularity as a tool to suggest that they may work as substitutes and are rather difficult to combine.

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