Technological and organizational designs for realizing economies of substitution

Abstract

Today's industrial landscape is characterized by rapid change and systemic technologies. Rapidchange results in ever shorter product life cycles that demand continual innovation from firms.The systemic nature of technologies makes it difficult, if not impossible, for any one firm tomanufacture all components of a technological system. We propose that these challenges bemet by designing technological systems that have the potential to yield economies of substitution.Additionally, we propose that these economies be realized by adopting the network mode ofgovernance. We examine the network mode at three levels-intrafirm, interfirm, andinstitutional-to illuminate the inherent tension between cooperation and competition at eachlevel, and to explore the implications of this tension for industrial dynamics.