Modular Innovation in Mature Structures : a study of barriers and drivers between young and established organizations

• The field of interest in this study is modular innovation. This type of innovation replaces an old parr of an existing product or adds new functionality to an existing product. Modular innovations are important to increase the performance of an existing product and retain the competitiveness of the product. The purpose of this thesis is to: suggest some explanatory factors that can influence how and if modular innovation, which adds new functionality to an existing product, can become adopted within a mature industry. To achieve this purpose the analysis has been divided in two levels. The first level analyses how the modular innova· tion firs with the product architecture of the final product. The second level analyses how the industrial structures within the industry affects the possibilities for an entrant firm to establish oneself as a new supplier. The empirical data is collected from the automotive industry. The study is based on in-depth interviews.The study illustrates that there is a difference between modular innovation that replace an existing module and modular innovation which adds new functionality to an existing product. In addition, the driving forces for replacing and adding innovation are different. The driving force for modular innovation which adds new functionality is linked with recognition of new needs. In contrast, replacing modular innovation is driven by competitive forces based on well-known parameters and the search for new technical solutions which can improve the performance of the existing module.The study shows how industrial structures affect the possibility for entreating firms to introduce new modular innovation. Although the innovation in technical terms very well fits the final product it is far from certain that the innovation will become adopted. Aggravating circumstances for new entrants is the lack of organizational resources. Due to the lack of resources, entreating firms can benefit from having owners active within the target industry. Moreover, the imerdependences between the established firms in the industry obstruct the possibilities of established firms to adopt innovations from new suppliers.

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