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Drawing on an empirical study on automakers? management of supplier
involvement in product development in Japan, this paper shows that when the design of
a component is outsourced to a supplier, how much and what automakers know about
the component matters for them to gain a better outcome. While the actual tasks of
designing and manufacturing components could be outsourced, automakers should
retain the relevant knowledge to obtain better component design quality. The paper
argues that knowledge partitioning should be distinguished from task partitioning, and
provides some implications for the knowledge-based theory of the firm.
The results indicate that effective pattern of knowledge partitioning differs by
the nature of component development project in terms of technological newness. For
regular projects, it is more important for the automaker to have a higher level of
architectural knowledge (how to coordinate various components for a vehicle) than of
component-specific knowledge, which is supposed to be provided by the supplier.
However, when the project involves new technology for the supplier, it is important for
the automaker to have a higher level of component-specific knowledge to solve
unexplored engineering problems together with the supplier. In innovative projects,
effective knowledge partitioning seems to demand some overlap between an automaker
and a supplier, rather than efficient and clear-cut boundaries, which are optimal for
regular projects. Such ?fluid? nature of knowledge boundaries contingent on the project
types poses a challenge for firms seeking both technological leadership as well as
efficiency in established products.
Developing and maintaining knowledge about an outsourced component is by
no means easy. When the actual design tasks are outsourced, automakers miss
substantial opportunities to gain relevant knowledge through learning by doing. Also,
obtained knowledge may be diffused among competitors through shared suppliers.
Another problem for automakers is that component-specific knowledge is important for
only limited cases (innovative projects). Even worse, component-specific knowledge
has a trade-off relationship with architectural knowledge.
Such an inherent dilemma of managing knowledge, however, may provide
some automakers with the opportunity to achieve sustainable competitive advantage.
Additional analysis shows that one automaker managed both types of knowledge better
than others in a manner that deals effectively with the dilemma. Its organizational
mechanisms include career development policies, extensive documentation of
technological information, internal training programs, and incentive schemes. The
difficulty in implementing those mechanisms in a consistent and complementary
manner seems to explain why there was a significant variance among automakers in
knowledge level, even when the actual tasks were carried out by a shared supplier.
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