Effects of Customization and Product Modularization on Financial Performance

Paper in proceeding, 2016

The need for customized products is constantly increasing. Over recent decades, many companies have adopted a product modularization strategy to address this growing demand for product variety. However, research on the financial effects of product modularization remains limited. Therefore, the purpose of this paper is to “investigate the effects of customization and product modularization on financial performance”. This is done based on data collected between November 2014 and February 2015 through an online questionnaire. The population for the survey is the Swedish manufacturing industry, more specifically, Swedish firms with more than 100 employees and having product development within their business unit. The final sample was a total of 160 business units, resulting in a final response rate of 48.5 percent. Based on our analysis of the data collected it is not possible to conclude that companies’ financial performance depends on the high degree of customization. But, we find that product modularization is a mediator between customization and financial performance. In summary, using product modularization as a strategy to facilitate companies’ need for customization has positive effects on financial performance.