Technological and Organizational Designs to Achieve Economies of Substitution

Raghu Garud
Arun Kumaraswamy

Stern School of Business
New York University


(Garud, R. and A. Kumaraswamy. 1995. Technological and Organizational Designs to Achieve Economies of Substitution. Strategic Management Journal 16, Special Issue: 93-110.)

Today's industrial landscape is characterized by rapid change and systemic technologies. Rapid change results in ever shorter product life cycles that demand continual innovation from firms. The systemic nature of technologies makes it difficult, if not impossible, for any one firm to manufacture all components of a technological system. It is proposed that these challenges be met by designing technological systems that have the potential to yield economies of substitution. Additionally, it is proposed that these economies be realized by adopting the network mode of governance. The network mode is examined at 3 levels - intrafirm, interfirm, and institutional - to illuminate the inherent tension between cooperation and competition at each level, and to explore the implications of this tension for industrial dynamics.

To appear in "Strategic Management of Intellectual Capital and Organizational Knowledge" edited by Nick Bontis & Chun Wei Choo (Oxford University Press).