Beyond the "Mirroring" Hypothesis: Product Modularity and Interorganizational Relations in the Air Conditioning Industry

This study explores if, to what extent, and under which conditions modular products are associated with modular organizations (the “mirroring hypothesis”). We analyze the product and organizational architectures of three firms in the air conditioning industry through an original dataset of 100 components and supply relationships. Applying a variety of regression methods, we show that, under the condition of product architecture stability, at the component level supplier relations for loosely coupled components are characterized by less information sharing, which implies that the degree of coupling of product components varies directly with the degree of coupling of organizations (the “mirroring hypothesis”). Also, the performance of supply relationships depends on the amount of buyer-supplier information sharing, but not on the degree of component modularity, which supports the relational view and confirms that product modularity does not have unambiguous effects on organizational performance. Moreover, the degree of component modularity negatively moderates the impact of buyer-supplier information sharing on supplier-relationship performance, which confirms that component modularity works as an ex-ante, embedded substitute for high-powered inter-organizational integration mechanisms. Finally, contingent on firms’ strategies, organizational structures and capabilities, we argue that at the firm level, higher product modularity may be associated either with less information sharing with suppliers, which implies that the mirroring effect might hold also at the firm level, or with more information sharing with suppliers, which implies that there may be increasing returns to modularity-in-design efforts because of inter-organizational integration (the “complementarity hypothesis”).