Working Paper | HBS Working Paper Series | 2012

Modularity and Organizations

by Carliss Y. Baldwin

Abstract

Modularity describes the degree to which a complex system can be broken apart into subunits (modules) that can be recombined in various ways. Modularity is important for organizations and the economy because the boundaries of organizational units and corporations are likely to match the boundaries of underlying technological modules. (This correspondence is called "mirroring.") In this essay, I explain the concept of modularity and describe how systems can be modularized. I then explain why mirroring is likely to be a commonly observed organizational pattern and review the empirical evidence. I conclude with open research questions.

Keywords: complex systems; information hiding; loosely-coupled systems; mirroring; mirroring hypothesis; modules; modularity; organizational design; near-decomposable systems; product architecture; option value; Organizational Design; Complexity;

Citation:

Baldwin, Carliss Y. "Modularity and Organizations." Harvard Business School Working Paper, No. 13-046, November 2012. (To appear in the Elsevier International Encyclopedia of the Social and Behavioral Sciences, 2nd edition; available on request to the author.)