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

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.

Complex product and supplier interfaces in aeronautics

“…Complex products are characterized by a large number of interacting components relying on new technologies and are developed within large supply chains (Hobday, 1998;New and Westbrook, 2004). Because mastering all the knowledge and skills required for their production is difficult for a single firm, the participation of external suppliers providing a wide range of knowledge and components is essential to the complex process of product development (Prencipe, 2005;Persson and Ahlström, 2006;Becker and Zirpoli, 2011). In addition, this process has to be coordinated by a central agent responsible for the integration of knowledge and components gathered from distributed sources: this agent is "the system integrator" (Brusoni and Prencipe, 2001).…”