Modularity, interfaces definition and the integration of external sources of innovation in the automotive industry

In the last two decades, the auto industry has shown a steady increase of vehicle development outsourcing and a shift of both product development tasks and knowledge from carmakers to suppliers. This trend has increased the interest toward product modularity as a tool to ease the integration of external sources of innovation but there is contradictory evidence concerning the benefits of modularity in inter-firm coordination in the automotive industry. Moreover, although modularity literature considers standard interfaces one of the constitutive elements of modularity and a means for easing design outsourcing, very few studies have analyzed the genesis and the micro-dynamics of the interfaces definition process. In order to fill this research gap, this paper focuses on how assemblers and suppliers define the component-vehicle interfaces in component co-development projects. This study adopts a “quasi-experimental design approach” comparing two similar vehicle component co-development projects carried out by the same first-tier supplier with two different automakers. Under the ceteris paribus conditions defined by the research design, the empirical evidence derived from the analysis of the two projects shows that, differently from what modularity theory claims: the interface definition process is neither technologically determined nor the mere result of product architectural choices; the OEMs and the supplier's capabilities, degree of vertical integration, knowledge and strategic focus drive the partitioning of the design and engineering tasks, the interfaces definition process, and the choice of the inter-firm coordination mechanisms. Furthermore, while component modularity and design outsourcing are considered as complements in modularity literature, our findings suggest that they may work as substitutes and are rather difficult to combine.