This paper uses an analysis of developments in aircraft engine control systems to explore the implications of specialization in knowledge production for the organization and the boundaries of the firm. We argue that the definition of boundaries of the firm in terms of the activities performed in house does not take into account that decisions to outsource production and other functions are different from decisions to outsource technological knowledge. We show that multitechnology firms need to have knowledge in excess of what they need for what they make, to cope with imbalances caused by uneven rates of development in the technologies on which they rely and with unpredictable product-level interdependences. By knowing more, multitechnology firms can coordinate loosely coupled networks of suppliers of equipment, components, and specialized knowledge and maintain a capability for systems integration. Networks enable them to benefit from the advantages of both integration and specialization. Examples from other industries extend to other contexts the model we develop.
Get full access to this article
View all access options for this article.
References
1.
AroraA.GambardellaA.: 1994“The changing technology of technical change: General and abstract knowledge and the division of innovative labour.”Research Policy, 23: 523–532.
2.
BaldwinC.ClarkK.: 2000The Power of Modularity. Cambridge, MA: MIT Press.
3.
BrusoniS.: 2001“The division of labour and the division of knowledge: The organisation of engineering design in the chemical industry.” Unpublished Ph.D. thesis, SPRU, University of Sussex at Brighton, UK.
4.
BrusoniS.PrencipeA.: 2001“Unpacking the black box of modularity: Technologies, products, organisations.”Industrial and Corporate Change, 10: 179–205.
5.
ChesbroughH.KusunokiK.: 2001“The modularity trap: Innovation, technology phase-shifts, and the resulting limits of virtual organizations.” In NonakaI.TeeceD. (eds.), Managing Industrial Knowledge: Creation, Transfer and Utilization: 202–230. Thousand Oaks, CA: Sage.
6.
ClarkB. R.: 1983The Higher Education System: Academic Organization in Cross-national Perspective. Berkeley: University of California Press.
7.
DaviesA.: 1999“Innovation and competitiveness in complex product systems: The case of mobile phone systems.” In MitterS.BastosM. (eds.), Europe and Developing Countries in the Globalised Information Economy: 107–125. London: UNU Press.
8.
EisenhardtK. M.: 1989“Building theories from case study research.”Academy of Management Review, 14: 532–550.
9.
FlandersT. A.: 1974“The architecture of a turbine engine control.” Paper presented at the Joint Royal Aeronautical Society and Institute of Electrical Engineering Symposium, Application of Electrical Control to Aircraft Propulsion System, London.
10.
GambardellaA.TorrisiS.: 1998“Does technological convergence imply convergence in markets? Evidence from the electronics industry.”Research Policy, 27: 445–463.
11.
GranstrandO.PatelP.PavittK.: 1997“Multitechnology corporations: Why they have ‘distributed’ rather than ‘distinctive core’ capabilities.”California Management Review, 39(4): 8–25.
12.
GriffithsD. M.PowellR. D.: 1974“The use of digital control for complex power plant management.” AGARD Conference Proceedings N. 151, Power Plants Controls for Aircraft Gas Turbine Engines, Ustaoset, Norway, September.
13.
HendersonR. M.ClarkK. B.: 1990“Architectural innovation: The reconfiguration of existing product technologies and the failure of established firms.”Administrative Science Quarterly, 35: 9–30.
14.
HughesT. P.: 1992“The dynamics of technological change: Salients, critical problems and industrial revolutions.” In DosiG.GiannettiR.ToninelliP. A. (eds.), Technology and Enterprise in a Historical Perspective: 97–118. Oxford: Oxford University Press.
15.
KogutB.: 2000“The network as knowledge: Generative rules and the emergence of structure.”Strategic Management Journal, 21: 405–425.
16.
LandesD. S.: 1969The Unbound Prometheus. Cambridge: Cambridge University Press.
17.
LangloisR. N.: 1992“Transaction costs economics in real time.”Industrial and Corporate Change, 1: 99–127.
18.
LangloisR. N.: 1997“Cognition and capabilities: Opportunities seized and missed in the history of the computer industry.” In GarudR.NayyarP.ShapiraZ. (eds.), Technological Innovation: Oversights and Foresights: 71–94. New York: Cambridge University Press.
19.
LangloisR. N.RobertsonP. L.: 1992“Networks and innovation in a modular system: Lessons from the microcomputer and stereo component industries.”Research Policy, 21: 297–313.
20.
LawrenceP. R.LorschJ. W.: 1967“Differentiation and integration in complex organizations.”Administrative Science Quarterly, 12: 1–47.
21.
MalerbaF.OrsenigoL.: 1996“The dynamics and evolution of industries.”Industrial and Corporate Change, 5: 51–87.
22.
MattinglyJ. D.HeiserW. H.DaleyD. H.: 1987Aircraft Engine Design. Washington, DC: American Institute of Aeronautics and Astronautics.
23.
MazzoleniR.: 1999“Innovation in the machine tools industry: A historical perspective on the dynamics of comparative advantage.” In MoweryD.NelsonR. (eds.), Sources of Industrial Leadership: 169–216. Cambridge: Cambridge University Press.
24.
MonteverdeK.TeeceD.: 1982“Supplier switching costs and vertical integration in the automobile industry.”Bell Journal of Economics, 13(1): 206–213.
25.
MoweryD. C.: 1983“The relationship between intrafirm and contractual forms of industrial research in American manufacturing 1900–1940.”Explorations in Economic History, 20: 351–374.
26.
NelsonR. R.: 1991“Why firms differ and why it matters.”Strategic Management Journal, 12: 61–74.
27.
NelsonR. R.WinterS.: 1982An Evolutionary Theory of Economic Change. Cambridge, MA: Belknap Press of Harvard University.
28.
OrsenigoL.PammolliF.RiccaboniM.: 2001“Technological change and network dynamics: Lessons from the pharmaceutical industry.”Research Policy, 30: 485–508.
29.
OrtonJ. D.WeickK. E.: 1990“Loosely coupled systems: A reconceptualization.”Academy of Management Review, 15: 203–223.
30.
PatelP.PavittK.: 1994“The continuing, widespread (and neglected) importance of improvements in mechanical technologies.”Research Policy23: 533–546.
31.
PavittK: 1998“Technologies, products and organisation in the innovating firm: What Adam Smith tells us and Joseph Schumpeter doesn't.”Industrial and Corporate Change, 7: 433–452.
32.
PerrowC.: 1967“A framework for the comparative analysis of organizations.”American Sociological Review, 26: 194–208.
33.
PisanoG. P.: 1990“The R&D boundaries of the firm: An empirical analysis.”Administrative Science Quarterly35: 153–176.
34.
PisanoG. P.: 1997The Development Factory: Unlocking the Potential of Process Innovation. Cambridge, MA: Harvard Business School Press.
35.
PrencipeA.: 1997“Technological capabilities and product evolutionary dynamics: A case study from the aero engine industry.”Research Policy25: 1261–1276.
36.
PrencipeA.: 2000“Breadth and depth of technological capabilities in complex product systems: The case of the aircraft engine control system.”Research Policy29: 895–911.
37.
PrencipeA.: 2002Strategy Systems, and Scope: Managing Systems Integration in Complex Products. London: Sage (forthcoming).
38.
RichardsonG.: 1972“The organisation of industry.”Economic Journal, 82: 883–896.
RosenbergN.: 1976Perspectives on Technology. Cambridge: Cambridge University Press.
41.
SakoM.MurrayF.: 1999“Modules in design, production and use: Implications for the global automotive industry.” Paper presented at the International Motor Vehicle Program (IMVP) Annual Sponsors’ Meeting, Cambridge, MA.
42.
SanchezR.MahoneyJ. T.: 1996“Modularity, flexibility, and knowledge management in product and organization design.”Strategic Management Journal, 17(Winter Special Issue): 63–76.
43.
SchererF. M.: 1988“The propensity to patent.”International Journal of Industrial Organization, 1: 107–128.
44.
TeeceD. J.: 1976Vertical Integration and Vertical Divestiture in the U.S. Oil Industry. Stanford, CA: Stanford University Institute for Energy Studies.
45.
TeeceD. J.: 1986“Profiting from technological innovation: Implications for integration, collaboration, licensing, and public policy.”Research Policy, 15: 285–305.
46.
UlrichK. T.: 1995“The role of product architecture in the manufacturing firm.”Research Policy, 24: 419–440.
47.
von HippelE.: 1987“Co-operation between rivals: Informal know-how trading.”Research Policy, 16: 291–302.
48.
von TunzelmannG. N.: 1998“Localised technological search and multitechnology companies.”Economics of Innovation and New Technology, 6: 231–255.
49.
WangQ.von TunzelmannG. N.: 2000“Complexity and the functions of the firm: Breadth and depth.”Research Policy, 29: 805–818.
50.
WeickK. E.: 1982“Management of organizational change among loosely coupled elements.” In P. S. Goodman and Associates (eds.), Change in Organizations: 375–408. San Francisco: Jossey-Bass.
