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Chapter 9
The Strength of IT-Based (Virtual) Interfirm
Ties in the Development of Complex Product
Systems
Ikenna S. Uzuegbunam
Abstract
This chapter examines the value of “virtual embeddedness” in the context
of firms that develop complex product systems (CoPS). The development of CoPS
usually involves many firms working together. Firms may choose to maintain arms-
length relationships with their partners. But often they must coordinate new product
development (NPD) through more embedded interactions because of the intricate
nature of systems development in CoPS. Although embeddedness can be socially
constructed, the rise of Internet and digital technologies have given way to the emer-
gence of a new form of embeddedness - virtual embeddedness, which provides
CoPS firms with unprecedented opportunities for learning and scope economies in
the process of NPD. Based on a new typology of virtual embeddedness in organi-
zational space, I posit that virtual embeddedness is a good complementary vehicle
to modularity in the management of NPD between CoPS firms. Accordingly, I draw
some implications for future research.
9.1 Introduction
The problem of designing and coordinating the activities of large-scale complex sys-
tems is central to the management research enterprise (Ethiraj, 2007). Many CoPS
innovation projects require teams of highly specialized people working in concert
across company boundaries (Ethiraj, 2007; Hobday, 1998). Although teams in CoPS
development projects may choose to communicate through face-to-face interaction
whenever possible, most communication between team members working across
firms tends to take place online (virtually), via information technology (IT).
Virtual communication between new product development (NPD) teams in CoPS
has become more prevalent because of recent advances in IT and the accompanying
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