Modularity and innovation in complex systems

Modularity and innovation in complex systems

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Article ID: iaor20073229
Country: United States
Volume: 50
Issue: 2
Start Page Number: 159
End Page Number: 173
Publication Date: Feb 2004
Journal: Management Science
Authors: ,
Abstract:

The problem of designing, coordinating, and managing complex systems has been central to the management and organization literature. Recent writings have tended to offer modularity as at least a partial solution to this design problem. However, little attention has been paid to the problem of identifying what constitutes an appropriate modularization of a complex system. We develop a formal simulation model that allows us to carefully examine the dynamics of innovation and performance in complex systems. The model points to the trade-off between the destabilizing effects of overly refined modularization and the modest levels of search and a premature fixation on inferior designs that can result from excessive levels of integration. The analysis highlights an asymmetry in this trade-off, with excessively refined modules leading to cycling behavior and a lack of performance improvement. We discuss the implications of these arguments for product and organization design.

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