Managing Modularity of Product Architecture: Towards an Integrated Theory

The management of innovation through modular product architecture strategies is gaining increasing importance for firms, both in practice and theory. Modularity refers to a new product development strategy in which interfaces shared among components in a given product architecture are specified and standardized to allow for greater substitutability of components across product families. It is argued that the degree of modularity inherent in product architectures depends on the constituent components and interfaces. This paper introduces a mathematical model, termed the modularization function, for analyzing the degree of modularity in a given product architecture. It takes into account the following variables: components; degree of coupling; and substitutability of new-to-the-firm components. The application of the modularization function is illustrated with two elevator systems from Schindler-traction and hydraulic. The comparative analysis of the elevators captures the sensitivity and dynamics of product architecture modularity created by three types of components (standard, neutral, and unique) and two types of interfaces (fundamental and optional).