MODULARITY AND OUTSOURCING--A STUDY OF GENERATIONAL SEQUENCES IN THE U.S. AUTOMOTIVE COCKPIT INDUSTRY.pdf

MODULARITY AND OUTSOURCING: A STUDY OF GENERATIONAL SEQUENCES IN THE U.S. AUTOMOTIVE COCKPIT INDUSTRY SEBASTIAN K. FIXSON Industrial Pahl van der Linden Ulrich Pisano, 1990) to economics (Holmstrom Williamson, 1985) have focused on this issue. Our intent with this paper is to focus on the interactions between product architecture and firm boundary. The existing constructs for these interactions in the literature can be broadly clustered into two categories: one that argues for a causal link running from product architecture to firm boundary, another representing the reverse argument, i.e. the attributes of the firms boundary impact the products architectural characteristics. Some authors suggest that both types of effects can occur simultaneously (Fine, 1998; Gulati Leonard-Barton, 1992). The industry structure as a whole is then the aggregated outcome of this process. Firm Boundary affects Product Architecture There are several ways in which the location of the firms boundary can affect the products architecture. In a supply chain, the location of firm boundaries determines to a large extent ownership and access to the capabilities available in the supply chain. In response, a firm may decide to design its product such that the products architecture makes it easy to deploy externally available capabilities. The evolutionary perspective provides a theoretical underpinning for this argument. If systems - like organisms - react to demands from their environment to increase their fitness level, they will adjust to external forces. With respect to their product architecture this means that products migrate towards or away from higher levels of modularity driven by external factors (Schilling, 2000). Heterogeneity amplifies the impact of Academy of Management Best Conference Paper 2004 TIM: D2 external factors such as supply and demand. For example, if a multitude of suppliers exists that offers a wide variety of technologies, the product architecture will migrate to higher levels of modularity to take advantage of the situation. Since it is more likely that a higher variety exists outside of the firm than inside, this means the location of the firm boundary affects the product architecture choice. Similarly, higher levels of demand heterogeneity often require a variety of sales channels, customer relations, etc. which, in turn, exercise pressure to modularize the product architecture. An Exploratory Framework To help analyze the dynamics between product architecture and firm boundary location we suggest a two-step framework that separates description from evaluation. In the first step, changes in both product architectures and firm boundary location are recorded, i.e., measured at multiple points in time. This requires the development of measures for both constructs that are comparable across time and across firms. While multiple measurements of these constructs help describe the change processes over time, by themselves they do not demonstrate causality (although they might help exclude one type of causality direction). Consequently, the second step includes the search for drivers that could have caused the change. THE CASE OF AUTOMOTIVE COCKPITS IN NORTH AMERICA Research Design Automotive cockpits are a good candidate for our study because they have evolved through various degrees of modularity over the past decade. We call a cockpit the sum of components that includes the instrument panel, instrument cluster, HVAC (Heating, Ventilating, Air Conditioning), Audio, AC electronic controls, wiring harness, steering wheel/column, airbags, cross-car beam, and some smaller components such as ducts, glove box, bezels/trim components. Our unit of analysis is the individual cockpit development project because it is the level at which firm boundaries are determined anew for every project. Measures. The precise determination of various degrees of modularity has proven very difficult, mostly because multiple product characteristics are often subsumed under the heading modularity and the weight of these individual characteristics is strongly context dependent (Fixson, 2003). To overcome this obstacle, we defined three generations of product architectures, representing three different levels of increasing modularity, albeit specific to the product under investigation. Generation 0 represents the relatively non-modular product architecture that has been used for decades in which the automaker (customer) engineers the product, buys the components, and installs the components individually and sequentially while the automobile travels down the assembly line. Cockpits of generation 1 are designed to be pre-assembled off the main assembly line and installed to the automobile in one piece. The main difference between generation 0 and generation 1 concerns the interfaces between cockpit and vehicle. Generation 2 cockpits contain design changes relative to generation 1 that take advantage of possibilities for parts integration, assembly optimization, etc. The industry as a whole has moved progressively from generation 0 to 1, to 2. Previous research has treated the location of the firm boundary often as an integer decision. For example, the decision to acquire or to license a technology can be interpreted as a decision to locate the firm boundary, e.g., (Schilling Takeishi, 2002) or simply a temporary effect. Another promising avenue for future research is the investigation of longer term processes, and the question of whether and under which conditions the process might reverse itself (Fine, 1998). Academy of Management Best Conference Paper 2004 TIM: D5 REFERENCES AVAILABLE FROM THE FIRST AUTHOR Concept Phase 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Generation 0Generation 1Generation 2 Work Content 2. Tier 1. Tier OEM Design Phase 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Generation 0Generation 1Generation 2 Work Content 2. Tier 1. Tier OEM Engineering Phase 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Generation 0Generation 1Generation 2 Work Content 2. Tier 1. Tier OEM Validation Phase 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Generation 0Generation 1Generation 2 W