Bottlenecks, Modules and Dynamic Architectural Capabilities

Carliss Y. Baldwin
2014 Social Science Research Network  
How do firms create and capture value in large technical systems? In this paper, I argue that the points of both value creation and value capture are the system's bottlenecks. Bottlenecks arise first as important technical problems to be solved. Once the problem is solved, the solution in combination with organizational boundaries and property rights can be used to capture a stream of rents. The tools a firm can use to manage bottlenecks are, first, an understanding of the technical
more » ... of the system; and, second, an understanding of the industry architecture in which the technical system is embedded. Although these tools involve disparate bodies of knowledge, they must be used in tandem to achieve maximum effect. Dynamic architectural capabilities provide managers with the ability to see a complex technical system in an abstract way and change the system's structure to manage bottlenecks and modules in conjunction with the firm's organizational boundaries and property rights.
doi:10.2139/ssrn.2512209 fatcat:szigjrxvhndwdjihmapn4vps3i