Balancing modularity and solution space freedom: effects on organisational learning and sustainable innovation

Abstract

Many technology-intensive (TI) firms find it challenging to leverage customisation and achieve sustainable innovation. Although some firms use modularity to tackle this challenge, mixed effects on sustainable innovation have been reported. This study uses organisational learning and ambidexterity theory to provide insights into how TI firms can achieve 'winwin' situations where sustainable innovation is increased through customisation. First, we argue that customisation should be viewed two-dimensionally and identify both modularity and solution space freedom as important dimensions. We argue that modularity reflects knowledge specialisation and solution space freedom reflects knowledge variety. Both of these dimensions affect organisational learning and, in turn, sustainable innovation. Second, we argue that the relationship between customisation and organisational learning is affected by supplier characteristics, specifically supplier sophistication. Survey data from 166 managers were used to empirically test the conceptual model and hypotheses. Polynomial response surface analysis confirms that customising by balancing high degrees of both modularity and solution space freedom results in superior organisational learning. High levels of supplier sophistication do not strengthen these effects. Rather, our results show that combining high degrees of modularity with constrained solution spaces increases learning for TI firms working with less sophisticated suppliers. In addition, organisational learning fully mediates the effect of customisation on sustainable product and process innovation.Keywords: modularity; solution space; customisation; organisational learning; sustainable innovation IntroductionTo adapt to global competitive pressures, firms must accommodate heterogeneous customer needs while mitigating the ecological and environmental impact (Boër et al. 2013;Medini, Da Cunha, and Bernard 2015). On the one hand, the consumerisation of business-to-business (B2B) buying results in customers insisting on complex solutions against lower costs (Davie, Stephenson, and De Uster 2010;Lingqvist, Plotkin, and Stanley 2015). On the other hand, increasing global environmental concerns prompt firms to pay more attention to sustainable innovation, i.e. creating or improving products and processes to contribute to the ecological environment (Boons et al. 2013;Chen, Lai, and Wen 2006;Fiksel et al. 2014;Flores et al. 2008;Foxon and Pearson 2008). While firms have to pursue both customisation and sustainable innovation to remain competitive (Boër et al. 2013;Medini, Da Cunha, and Bernard 2015), pursuing both of these goals jointly is perceived as being very difficult (Boër et al. 2013).The manufacturing paradigms of customisation and sustainable innovation are frequently referred to in the literature, yet mainly treated in isolation. Recent research has brought the two paradigms together and has proposed to simultaneously model customisation and sustainability (e.g. Boër et al. 2013;Medini, Da Cunha, and Bernard 2015). How...

The impact of modular design and innovation on new product performance

“…Firms can then gain a near-monopoly advantage in their industries (Fixson and Park, 2006). However, they may need to balance the use of MD with an appropriate level of freedom in the solution space (Vos et al , 2018), with effective strategic learning (Salonen et al , 2018) or with an innovation strategy (Bouncken et al , 2015). Finally, further comprehensive studies should be conducted to examine the diminishing effects of MD on product innovation.…”

“…For example, Lau et al (2011) argue that pursuing both modular and innovative products may be counterproductive, and the critical factors in creating MD have not been fully identified. Vos et al (2018) find that MD and freedom in terms of design solutions must be aligned to ensure effective organisational learning and new product performance (NPP). In general, MD is important for successful product innovation as it helps motivate developers to create new products using a trial and error approach (Ulrich and Eppinger, 2000).…”

“…As stated above, various advantages and disadvantages of implementing MD for product innovation have been identified in the literature. However, most studies have been conducted using simulations or are case studies (Zhang et al , 2019; Marion and Meyer, 2018; Vos et al , 2018). Our study provides new empirical evidence for the effect of modularity and innovation on product performance.…”

Gestão Do Conhecimento, Inovatividade, Criatividade E Desempenho Inovador Em Empresas De Saúde

“…Neste sentido, Quandt, Ferraresi e Bezerra (2017) propõem um modelo que associa o desempenho inovador a dez dimensões de inovatividade organizacionais, a saber: (1) estratégia, responsável por explicitar o papel da inovação no contexto geral (BAUM; LOOF; NABAVI, CANDI, et al, 2018;SCHIAVI;BEHR, 2018) MEMON, 2019;VOS, et al, 2018;CARVALHO, et al, 2017).…”

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“…Most studies suggested that PM can promote PI (e.g. Baldwin and Clark, 1997; Hao et al , 2015; Lau et al , 2010; Mikkola, 2000; Vickery et al , 2016; Vos et al , 2018; Wang et al , 2016). Studies have found that PM can improve efficiency (Barbosa et al , 2017; Piran et al , 2016) and increase launch speed of new product (Vickery et al 2016).…”