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Modularity and incremental innovation: the roles of design rules and organizational communication

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Abstract

As little attention has been paid to the relationship between modularity and near decomposability, extant studies have not unveiled the impact of modularity on incremental innovation completely. We argue that the modular structure is a special case of nearly decomposable structure, in which the interdependencies between modules are specified by design rules, and the degree of modularity is defined by the level of near decomposability and the extent to which intermodule dependencies are specified. The results of our simulation experiments show that in the term of near decomposability, the increase of modularity leads to higher innovation advantage in the short term, but effective communication between modules can help systems with moderate and low modularity gain more innovation benefits in the long term; in the aspect of design rules, modularization may restrict the search space of the incremental innovation within each module, but under some conditions the option value of modularity may offset or even exceed the restriction effect of design rules.

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Authors and Affiliations

  1. School of Management, Zhejiang University, Hangzhou, Zhejiang, 310058, China

    Gang Zhang

  2. School of Economics, Zhejiang University, Hangzhou, Zhejiang, 310027, China

    Ruoyang Gao

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  1. Gang Zhang
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  2. Ruoyang Gao
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Correspondence to Ruoyang Gao.

Additional information

This research was supported by National Science Foundation of China under grant No. 70671091 and 70732001. The prior version of this paper was presented at the 2009 annual meeting of the Academy of Management in Chicago.

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Zhang, G., Gao, R. Modularity and incremental innovation: the roles of design rules and organizational communication. Comput Math Organ Theory 16, 171–200 (2010). https://doi.org/10.1007/s10588-010-9071-5

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