DRIVERS OF ORGANIZATIONAL MODULARITY IN SUPPLY CHAINS - A CROSS SECTIONAL STUDY OF U.S. MANUFACTURING INDUSTRIES

Abstract

This dissertation investigates the driving forces behind the emerging phenomenon of "organizational modularity", by which firms create "virtual" organizations through outsourcing functions, by using contract manufacturers, by forming alliances, and by using temporary employment contracts, as they organize their activities within supply chains. Using transaction cost analysis as the overarching theoretical framework for the analysis, a number of hypotheses that relate industry structure to modularity are developed. A large scale industry-level data set is used to test the hypotheses. Statistical results show that heterogeneity of supply sources, and scale economies in focal and downstream industries, are positively associated with greater use of modular forms, whereas other factors, such as the concentration of upstream and downstream industries, are associated with less modularity. In the current outsourcing environment, these findings provide crucial insights to capture the dynamics of the prevalent modular networks.