Effects of product modularization on companies’ financial performance
Paper in proceedings, 2017
There is a constantly increasing need for companies to become more cost efficient, for example to reduce its product development cost and shorten the development lead-time. Many companies has therefore adopted a product modularization strategy. However, the research on financial performance effects of product modularization still remains limited. Therefore, the purpose of this paper is to investigate the financial effects of product modularization and how these effects are moderated by cost efficiency pressure. This is done based on data collected through an online questionnaire. The population for the survey is the Swedish manufacturing industry, and all firms in that industry with more than 100 employees and having product development within their business unit. The final sample was 160 business units, corresponding with a response rate of 48.5 percent. The analyses show that the degree of product modularization has positive effects on financial performance, but a higher degree of cost efficiency pressure will affect financial performance negatively. We also found a moderation effect; the degree of product modularization has positive financial effects in markets with low or medium high cost efficiency pressure, but in contexts with high cost efficiency pressure we could not find the same positive effects.