Competition in modular clusters
By: Carliss Y. Baldwin, C. Jason Woodard
Contributors: Woodard, C. Jason; Harvard Business School
Series: Working paper / Harvard Business School -- 08-042; Working paper (Harvard Business School) -- 08-042
Publisher: Harvard Business School
Published: 2007
Place of publication: Boston]
Language: eng
Number of pages: 49
Description: The last twenty years have witnessed the rise of disaggregated "clusters," "networks," or "ecosystems" of firms. In these clusters the activities of R&D, product design, production, distribution, and system integration may be split up among hundreds or even thousands of firms. Different firms will design and produce the different components of a complex artifact (like the processor, peripherals, and software of a computer system), and different firms will specialize in different stages of a complex production process. This paper considers the pricing behavior and profitability of these so-called modular clusters. In particular, we investigate a possibility hinted at in prior work: that for composite goods, a vertical pricing externality operating across complements can offset horizontal competition between substitutes. In this paper, we isolate the offsetting price effects and show how they operate in large (as well as small) clusters.
Notes: "December 2007"--Publisher's web site.

Includes bibliographical references.