Modularity on Industry Structure: The Case of the World the Effect of Product Bicycle Industry

The adoption of a modular product architecture for the bicycle allowed manufacturers to meet the simultaneous needs of product innovation and cost reduction. Such an approach however, has fragmented the industry into a series of largely independent segments that are primarily linked through the operation of market-based contracts. Active coordination between firms has been replaced by the embedded coordination that comes through modularity. The fragmentation of the industry on the basis of specialized capabilities has led to economic efficiencies and low barriers to entry for most segments of the industry. However, the lack of coordination has limited the industry's capability to make changes in the product architecture beyond the component level.