This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via HighWire Citing Articles via Google Scholar Google Scholar Articles by Ethiraj, S. K. Articles by Levinthal, D. Search for Related Content

Modularity and Innovation in Complex Systems

University of Michigan Business School, 701 Tappan Street,University of Michigan, Ann Arbor, Michigan 48109
The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
sendil{at}umich.edu
levinthal{at}wharton.upenn.edu

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.

Key Words: modularity; complex systems; innovation; nearly decomposable systems
History: Received: April 24, 2002;

This article has been cited by other articles:

				S. K. Ethiraj and D. Levinthal Hoping for A to Z While Rewarding Only A: Complex Organizations and Multiple Goals Organization Science, January 1, 2009; 20(1): 4 - 21. [Abstract] [PDF]

				T. Kretschmer and P. Puranam Integration Through Incentives Within Differentiated Organizations Organization Science, November 1, 2008; 19(6): 860 - 875. [Abstract] [PDF]

				P. Ghemawat and D. Levinthal Choice Interactions and Business Strategy Management Science, September 1, 2008; 54(9): 1638 - 1651. [Abstract] [PDF]

				S. K. Ethiraj, D. Levinthal, and R. R. Roy The Dual Role of Modularity: Innovation and Imitation Management Science, May 1, 2008; 54(5): 939 - 955. [Abstract] [PDF]

				S. Erat and S. Kavadias Sequential Testing of Product Designs: Implications for Learning Management Science, May 1, 2008; 54(5): 956 - 968. [Abstract] [PDF]

				H. Tanriverdi, P. Konana, and L. Ge The Choice of Sourcing Mechanisms for Business Processes Information Systems Research, September 1, 2007; 18(3): 280 - 299. [Abstract] [PDF]

				J. W. Rivkin and N. Siggelkow Patterned Interactions in Complex Systems: Implications for Exploration Management Science, July 1, 2007; 53(7): 1068 - 1085. [Abstract] [PDF]

				G. Hoetker, A. Swaminathan, and W. Mitchell Modularity and the Impact of Buyer-Supplier Relationships on the Survival of Suppliers Management Science, February 1, 2007; 53(2): 178 - 191. [Abstract] [PDF]

				T. Knudsen and D. A. Levinthal Two Faces of Search: Alternative Generation and Alternative Evaluation Organization Science, January 1, 2007; 18(1): 39 - 54. [Abstract] [PDF]

				M. G. Jacobides The architecture and design of organizational capabilities Ind. Corp. Change, February 1, 2006; 15(1): 151 - 171. [Abstract] [Full Text] [PDF]

				J. Birkinshaw and M. Lingblad Intrafirm Competition and Charter Evolution in the Multibusiness Firm Organization Science, November 1, 2005; 16(6): 674 - 686. [Abstract] [PDF]

				Giovanni. Gavetti and D. A. Levinthal 50th Anniversay Article: The Strategy Field from the Perspective of Management Science: Divergent Strands and Possible Integration Management Science, October 1, 2004; 50(10): 1309 - 1318. [Abstract] [PDF]