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Organizing Modular Production

Author

Listed:
  • Niko Matouschek
  • Michael Powell
  • Bryony Reich

Abstract

Products are increasingly made by assembling separately produced modules. Motivated by the notion that a firm’s production function drives its organization, we explore how modular production shapes a firm’s communication structure. Decisions are partitioned into modules and require closer coordination within modules than across. Each agent knows the state his decision must be adapted to. The principal decides whom each agent tells about his state, given that each communication link comes at a cost. We show that optimal communication networks follow a simple threshold rule and exhibit the threshold property. We discuss comparative statics, applications, and empirical implications.

Suggested Citation

  • Niko Matouschek & Michael Powell & Bryony Reich, 2025. "Organizing Modular Production," Journal of Political Economy, University of Chicago Press, vol. 133(3), pages 986-1046.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/733424
    DOI: 10.1086/733424
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