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This paper deals with the organizing of interactive product development. Developing products in interaction between firms may provide benefits in terms of specialization, increased innovation, and possibilities to perform development activities in parallel. However, the differentiation of product development among a number of firms also implies that various dependencies need to be dealt with across firm boundaries. How dependencies may be dealt with across firms is related to how product development is organized. The purpose of the paper is to explore dependencies and how interactive product development may be organized with regard to these dependencies.

The analytical framework is based on the industrial network approach, and deals with the development of products in terms of adaptation and combination of heterogeneous resources. There are dependencies between resources, that is, they are embedded, implying that no resource can be developed in isolation. The characteristics of and dependencies related to four main categories of resources (products, production facilities, business units and business relationships) provide a basis for analyzing the organizing of interactive product development.

Three in-depth case studies are used to explore the organizing of interactive product development with regard to dependencies. The first two cases are based on the development of the electrical system and the seats for Volvo’s large car platform (P2), performed in interaction with Delphi and Lear respectively. The third case is based on the interaction between Scania and Dayco/DFC Tech for the development of various pipes and hoses for a new truck model.

The analysis is focused on what different dependencies the firms considered and dealt with, and how product development was organized with regard to these dependencies. It is concluded that there is a complex and dynamic pattern of dependencies that reaches far beyond the developed product as well as beyond individual business units. To deal with these dependencies, development may be organized in teams where several business units are represented. This enables interaction between different business units’ resource collections, which is important for resource adaptation as well as for innovation. The delimiting and relating functions of the team boundary are elaborated upon and it is argued that also teams may be regarded as actors. It is also concluded that a modular product structure may entail a modular organization with regard to the teams, though, interaction between business units and teams is needed. A strong connection between the technical structure and the organizational structure is identified and it is concluded that policies regarding the technical structure (e.g. concerning “carry-over”) cannot be separated from the management of the organizational structure (e.g. the supplier structure). The organizing of product development is in itself a complex and dynamic task that needs to be subject to interaction between business units.

In this paper we appraise the ways in which use of closed-system proprietary product architectures versus open-system modular product architectures is likely to influence the dynamics and trajectory of new product market formation. We compare the evolutions of new markets in China for gas-powered two-wheeled vehicles (G2WVs) based (initially) on closed-system proprietary architectures and for electric-powered two-wheeled vehicles (E2WVs) based on open-system modular architectures. We draw on this comparison to suggest ways in which the use of the two different kinds of architectures as the basis for new kinds of products may result in very different patterns and speeds of new market formation. We then suggest some key implications of the different dynamics of market formation associated with open-system modular architectures for both the competence-based strategic management (CBSM) of firms and for technology and economic development policies of governments.

Specifically, we suggest how the use of open-system modular product architectures as the basis for new products is likely to result in dynamics of new market formation that call for new approaches to the strategic management of innovation and product creation. We also suggest technology and economic development policies favoring use of open-system modular architectures may stimulate new market formation and related economic development by providing platforms for accelerating technology development and dissemination, facilitating the formation of an industrial base of assemblers and component suppliers, assisting new firms in building customer relationships, enabling more geographically diffused economic development within countries, and facilitating development of export markets. We also suggest directions for further research into the potential for open-system modular product architectures to enable bottom-of-the-pyramid innovation processes, frugal engineering in developing economies, and development of low-cost product variations more generally.

Computer systems firms in Silicon Valley are responding to rising costs of product development, shorter product cycles and rapid technological change by focusing and building partnerships with suppliers, both within and outside of the region. Well-known firms like Hewlett-Packard and Apple Computers and lesser known ones like Silicon Graphics and Pyramid Technology are organized to combine the components and sub-systems made by specialist suppliers into new computer systems. As these firms collaborate to both define and manufacture new systems, they are institutionalizing their capacity to learn from one another. Three cases - a contract manufacturer, a silicon foundry, and the joint development of a microprocessor - illustrate how inter-firm networks help account for the sustained technological dynamism of the regional economy.

Our understanding of Japanese supply relationships comes primarily from studying the automobile industry. This paper identifies three elements of the automobile industry that, although generally assumed to be widespread, are largely absent in the notebook computer industry, leading to a different pattern of supply relationships: a sizable pool of external suppliers; the feasibility of shukko and cross-shareholding to strengthen supply relationships; and the adequacy of these means to manage external supply relationships. This finding debunks the myth of a monolithic model of “Japanese-style” supply relationships and illustrates the importance of idiosyncratic elements of an industry’s environment on its supply relationships.

The growing modularization of complex products encourages the division of labor in industry. End product manufacturers outsource production of individual components to large module suppliers, saving on costs in the short term. In the medium term, however, they sacrifice competences. The competitive strategy they choose – either cost leadership or differentiation – determines how this conflict is resolved. This paper examines the shift in competences to module suppliers, and the likely reactions of end product manufacturers, particularly those pursuing a differentiation strategy. The discussion begins at a general level, and then focuses on the automotive industry as an example. The paper derives potential strategic actions going forward based on transaction cost theory and core competency theory, and conducts a content analysis to examine them empirically.

To provide a theoretical explanation of why outsourcing relationships are inherently dynamic, in that the dependence of each party upon the other inevitably changes over time and thus so too will the power asymmetries between the parties.

Our approach is theoretical and draws upon insights from resource dependence theory, transaction cost economics, and the resource-based view of the firm, to focus on the power asymmetries between the focal firm undertaking the outsourcing and its suppliers. We illustrate our arguments using a longitudinal case study of the evolving relationship between Apple and the Foxconn Technology Group.

For supplier firms, the message is to upgrade, develop distinctive resources and capabilities, and diversify the customer base. Otherwise, suppliers will forever be condemned to low operating margins and the threat of being replaced by cheaper, more agile rivals. For focal firms, the message is not to rest on your laurels. The potency of isolating mechanisms may well dissipate, suppliers will no doubt strive to lessen their positions of dependence and competitors will inevitably emerge, with the result that once-profitable outsourcing arrangements may quickly erode.

We highlight the crucial role played by isolating mechanisms to underpin power asymmetries in outsourcing relationships, and thus enable focal firms to appropriate the rents from externalized value chain activities. We argue that the efficacy of many isolating mechanisms will tend to dissipate over time as competitors emerge to imitate successful strategies and products, and as resource and capability asymmetries erode.

Management, over time, takes a series of specific strategic actions. As strategic actions we define actions aimed at influencing how the actor is related to other actors. We propose that when a strategic action is committed affects the outcome of the action. An important reason for this is that strategic actions over time can be regarded as interdependent sequences of actions. Timing and sequences may be more or less – or is not at all – preplanned by an actor. In a network perspective a focal actor is dependent on other actors that commit strategic actions. This creates interdependencies that vary over time, which a focal actor influences in a proactive, interactive and/or reactive way. The timing of strategic actions is a general, quite complex and elusive phenomenon to be handled in practice and theory. Despite its importance, very little research has been published.

Customers in business-to-business markets are sellers of goods and services on their own. Thus, business-to-business suppliers may exert an influence on their customers’ buying decisions when performing marketing activities toward the customers of the customers by employing the concept of “multistage marketing”. Multi-stage marketing involves all sales-related measures which are aimed at the subsequent market stages (“customers of the customer”) which follow one or several primary customers in order to influence the buying behavior of these primary customers. Although the positive impacts of such activities are known, business-to-business companies often exclude the customers further along in the downstream supply chain from their marketing plans. But in a business-to-business context, the demand is always derived from buying decisions made further down the supply chain. The primary customers buy products or services because they want to use them – directly or indirectly – for either the production or the sale of other goods and services. Hence, derived demand, which can be traced to the end-user's primary demand, can be seen as the basis of multistage marketing.

The most common form of multistage marketing is ingredient (co-)branding, which occurs when a marketer providing an ingredient or component to an OEM advertises the ingredient to the customer of the assembled product. In addition to ingredient branding, this chapter identifies several other forms of multistage marketing and examines the underlying dimensions and processes of the phenomenon. The design of a marketing strategy using the concept of multistage marketing and its preconditions are discussed on a theoretical basis and are illustrated through concrete examples. The chapter provides a number of best practice examples in order to elucidate the issues concerning multistage marketing and its application in a company's marketing strategy serving business-to-business markets.

In this chapter we put projects at the centre stage of firms' activities – i.e. product and process innovation, strategy formulation and implementation, capability building and learning, organizational structure and design, and systems integration (the capability to combine diverse knowledge bases and physical components into functioning systems). Based on the findings of a 10-year research programme into firms producing high-value capital goods – known as complex products and systems (CoPS) – we draw out conceptual insights about project organizing that can inform and contribute to the development and reformulation of more universally applicable formal theories of strategic management and organization.