Abstract

Modularity has gained recently a great attention as an explanation of the contemporary trends of industrial dynamics, according to which production processes relying on external market-based interactions have become predominant over those relying on internal bureaucracy-based interactions. Starting from these general considerations in this paper we try to provide an answer to the following two questions: is there any relationship between the variations of the competitive environment and the predominance of certain types of configurations? In the affirmative case, is it possible to predict which configurations shall prevail in given competitive conditions? In order to answer to these questions, in this paper we present a model which tries to explain the competitive predominance of different modular configurations, when these are subject to a trade-off with respect to the kind of innovation strategies they can put into practice. In particular through a set of agent-based simulations we verify two hypotheses. The first one is the lower efficacy of decentralized configurations in developing complex innovations, as suggested by a recent strand of literature which has modelled innovation as a discovery process on fitness landscapes. The second one is the comparative advantage of centralized configurations, which occurs, for all levels of complexity, when the returns of innovation are lower. According to our model, when these conditions occur in a competitive context, the limits of markets are likely to become apparent.