Computational Perspectives III

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Advantages of Modular Designs

Previous topic's computational perspective points to the importance of partial information overlap for optimal sharing. Our next hypothesis continues to turn to computer science for inspiration, taking advantage of one of its most basic and powerful concepts - modular design.

Every programmer knows the value of dividing a large piece of software into subroutines - independent procedures that accomplish well-defined tasks. Such practices make software more manageable, easier to fix and more convenient to modify. Van Alstyne and Bulkley make a similar statement about the informational structure of organizations:

Hypothesis 7b: Modular designs can increase productivity by spreading the risk of process failure or enabling new combinations of processes that extend the efficient frontier.

In the slides that follow, we explore the mechanisms that underlie this hypothesis, and try to explain how a firm's modularity could improve its productivity.

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