Design Rules: The Power of Modularity Volume 1
Design Rules: The Power of Modularity Volume 1
Organizational Boundaries and Theories of Organization
Organization Science
Relative capacity: Retaining knowledge outside a firm's boundaries
Journal of Engineering and Technology Management
CROSSROADS---Organizing for Fluidity? Dilemmas of New Organizational Forms
Organization Science
Capabilities: Structure, Agency, and Evolution
Organization Science
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The concept of vertical architecture defines the scope of a firm and the extent to which it is open to final and intermediate markets; it describes the configurations of transactional choices along a firms value chain. A firm can make or buy inputs, and transfer outputs downstream or sell them. Permeable vertical architectures are partly integrated and partly open to the markets along a firms value chain. Increased permeability enables more effective use of resources and capacities, better matching of capabilities with market needs, and benchmarking to improve efficiency. Partial integration promotes a more dynamic, open innovation platform and enhances strategic capabilities by linking key parts of the value chain. This permeable vertical architecture, accompanied by appropriate transfer prices and incentive design, facilitates resource allocation and guides a firms growth process. Our longitudinal study of a major European manufacturer suggests that to understand how firm boundaries are set and what their impacts are, we need to complement the microanalytic focus on transactions with a systemic analysis at the level of the firm. It also shows how, over and above transactional alignment, decisions about boundaries and vertical architectures can transform a firms strategic and productive capabilities and prospects.