Networks of innovation and modularity: a dynamic perspective

The aim of this paper is to provide a comprehensive perspective for understanding the dynamics of modularity and the implications of those dynamics for innovation networks. The main contention of this paper is that the dynamics of technology development should reflect the dynamics of a firm network. During the early development of a technology, when the interactions among component types are unclear (in a state of flux) and, therefore, difficult to codify and freeze, organisations build connections with research centres and universities to explore alternative technological solutions. Once such interactions are better understood, codified, modularised and shared, then more exploitative networks (e.g., with suppliers and customers) may be better suited to exploit the current technology. In the transition from the early development phase to the more mature phase, firms must build ties to startups and new entrants, because these firms experiment with alternative design configurations that exploit the underlying technology. In addition, during this transition stage, firms must connect to third-party firms, since the supporting investments made by these firms may determine which of the alternative configurations will become 'the standard'. During this stage, the relationships across firms are defined and governed by modular interfaces that are, in turn, dictated by product interfaces.