Bij 03 2016 0039

Benchmarking: An International Journal
Technological change, information processing and supply chain integration: A

conceptual model
Roman Bartnik, Youngwon Park,
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To cite this document:
Roman Bartnik, Youngwon Park, (2018) "Technological change, information processing and supply
chain integration: A conceptual model", Benchmarking: An International Journal, Vol. 25 Issue: 5,
pp.1279-1301, https://doi.org/10.1108/BIJ-03-2016-0039
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Technological
Technological change, change
information processing and
supply chain integration
A conceptual model 1279
Roman Bartnik Received 14 March 2016

Revised 14 March 2016
University of Duisburg-Essen, Duisburg, Germany, and Accepted 10 July 2016
Youngwon Park
Tokyo Kouka Daigaku, Ota-ku, Japan
Abstract
Purpose – Technologies change quickly in the automotive industry. This can provide opportunities to
firms from emerging economies who try to enter the world stage of automotive production, provided they
can react to this more nimbly than established competitors. How technological change affects the supply
chain coordination of incumbents from developed economies and new entrants from emerging economies
should strongly determine the speed of competitive reaction. By using the example of automotive
transmission development, the purpose of this paper is to provide a conceptual model for the analysis and
offer research propositions.
Design/methodology/approach – The authors build a conceptual model based on information processing
theory and offer research propositions based on case study evidence of four automotive original equipment
manufacturers (OEMs) and five suppliers.
Findings – The authors find symptoms of two larger trends: increasing specialization and technological
linkages and a need to increase external supply chain integration beyond traditional structures. Comparing
the effects on Japanese and German incumbents, the authors find that increasing external supply chain
linkages proves to be harder for Japanese OEMs. Tight links and routines in the Japanese supply chain
networks may harm OEM efficiency under the new technological conditions, e.g. the lack of complete part
specifications and high demands for customization. Looking at effects on emerging market firms, Chinese
OEMs use quasi-open modular production settings in transmission development and lean strongly on inputs
from specialized foreign tier-one suppliers. Speed advantages must be weighed against long-term
disadvantages of dependence and insufficient R&D investments.
Research limitations/implications – The study explores how technological change affects inter-firm
development processes. The authors propose a framework and hypotheses based on information processing
theory and link the findings to the discussion on the impact of national institutional context on supply
chain coordination.
Practical implications – OEMs wanting to adapt complex existing internal structures to the changing
demands for information processing should focus first on improving internal capacities by improving
the amount and richness of information flow. Implementing new standards for simultaneous and
standardized software development across the supply chain is a key point for this. A second step should be
to boost the internal capacity to process higher richness of information, i.e. to understand the
meta-knowledge necessary to integrate across technological areas in the development of electronic control
units (ECUs).
Originality/value – The authors draw on original interview data in developed and emerging markets
and information processing theory to explore the complexity of inter-firm coordination in automotive
supply chains.
Keywords Manufacturing strategy, Supply chain management, Emerging markets, Technological innovation,
Information processing
Paper type Research paper
Benchmarking: An International
The authors gratefully acknowledge financial support from the German Federal Ministry of Education and Journal
Vol. 25 No. 5, 2018
Research (BMBF) through the IN-EAST School of Advanced Studies of the University of Duisburg-Essen pp. 1279-1301
(Grant No. 01UC1304). This paper forms part of a special section “Dynamic benchmarking issues in © Emerald Publishing Limited
1463-5771
emerging markets: building relevant theories and examining evolving practices”. DOI 10.1108/BIJ-03-2016-0039
BIJ 1. Introduction
25,5 Technological change and increasingly global component supply in the automotive industry
increases the need to integrate new product development across the supply chain (Das et al.,
2006; Jean et al., 2014; Thomas, 2013; Yan and Nair, 2015) and across technological
specializations such as mechanics, electronics and software development (Fujimoto and
Park, 2012; Lee and Berente, 2012). We explore how technological change affects inter-firm
1280 coordination and how the reaction of this change differs between firms from developed and
emerging markets.
We use the example of transmission development to study the effects of technological
change, looking through the prism of information processing theory (Daft and Lengel, 1986;
Tushman and Nadler, 1978). Recent studies have used this lens to analyze generic approaches
to supplier coordination (Bensaou and Venkatraman, 1995) and asked how managers adapt
their use of project coordination tools (Sakka et al., 2016) and communication channels (Oke and
Idiagbon-Oke, 2010) to specific degrees of information processing complexity. Other researchers

have looked at the effect of emerging market environment on the task of information processing
and studied how firms can improve their capability to predict environmental changes (Winkler
et al., 2015) and how supply chain planning and integration affects information processing
capabilities and performance (Srinivasan and Swink, 2015). We use the common thread of
information processing theory to propose a framework that binds these diverse findings
together and derive a number of propositions for the specific case of automotive transmission
development. We further aim to tease out the effect of institutional context by contrasting
automotive firms engaged in transmission development in Japan, China and Germany.
We argue that changes in the environmental conditions of transmission development
have led to higher interdependence, meaning a more diverse role of different technological
fields that need to be integrated and a higher degree of specialization meaning that
complexity within these fields has strongly increased. We link this change in environmental
conditions to a change in information processing requirements, notably the capacities for
reducing a lack of relevant information – uncertainty – and lack of agreement over the
interpretation of information – equivocality. Based on this, we propose hypotheses on how
technological change affects inter-company coordination. A main trend studied here is the
loss of control of automakers over specific technological modules that used to be specified,
designed and produced in-house. We find that Japanese, German and Chinese carmakers
react to these changes differently, with Japanese firms focusing on integrating their current
suppliers more tightly, while German firms tend to link up more broadly with suppliers from
other networks, while some Chinese firms act in a new institutional environment of
quasi-open modular product architecture that might, with the help of large established
tier-one suppliers prove to be a formidable challenge to current business models. However,
this challenging shout to the establishment may end in a whimper if growing sales numbers
make Chinese firms complacently neglect to pour their money into new technologies.
The remainder of the paper is structured as follows. First, we provide a brief overview
of supply chain integration (Section 2) and of the information processing framework (Section 3).
In the following section, we explain our empirical approach and provide background on the
companies and informants in our sample and the research instrument (Section 4). Next, we
present our findings and the resulting propositions and conceptual model in four sub-sections,
discussing in turn our propositions regarding the impact of environment, information processing
requirements, capacities and organizational design (Section 5). In the final section, we discuss
implications for theory and management as well as limitations and areas for future research.
2. Supply chain integration for technology development

Developing complex products increasingly involves the coordination of specialized sources
of knowledge across firm boundaries (Argyres and Bigelow, 2010; Brusoni et al., 2001;
Lee and Berente, 2012). This shifts the focus from challenges of intra-firm coordination to Technological
questions of supply chain integration. We use the terms integration and coordination/control change
interchangeably to draw on both streams of research on intra-firm coordination mechanisms
(Bartnik, 2009; Jaeger and Baliga, 1985; Martinez and Jarillo, 1989; Ouchi and Maguire, 1975;
Zeschky et al., 2014) and studies on inter-firm supply chain integration (Braunscheidel and
Suresh, 2009; Crook and Combs, 2007; Das et al., 2006; Flynn et al., 2010; Narayanan and
Raman, 2004; Zhao et al., 2011; Zhou and Benton, 2007). 1281
New technology development poses a specific challenge for integration, because it involves
uncertain, path-dependent, cumulative investments, which are often irreversible, tightly linked
to complementary assets and sub-systems and may produce results with a significant amount
of tacit knowledge which are hard to transfer and reproduce (Teece, 2000, pp. 36-39).
Moreover, development processes may have very different dynamics depending on the
technologies and product architectures in question (Fujimoto and Park, 2012). Like solving a
puzzle, sourcing complex parts is quite different from putting a few simple bricks together.
The sourcing puzzle can be complex (many parts), diverse (many technologies) and dynamic
(changing specifications between built stages). Empirical studies give indications that internal
integration may be a prerequisite for successfully integrating externally with suppliers and
customers (Flynn et al., 2010; Zhao et al., 2011). Depending on the type of part or development
process that is sourced, firms may need to perform such integration differently, for example,
by adapting their bargaining style (Crook and Combs, 2007, pp. 549-551) or by using more
interactive rather than formal types of control for more innovative inputs (Kang et al., 2012).
3. Theoretical framework: information processing and integration

mechanisms
Information processing theory sees “management” as collecting, combining and processing
relevant information (Egelhoff, 1991; Tushman and Nadler, 1978, p. 614; Wolf, 2005).
What managers do in this perspective can be boiled down to two central tasks: reducing
“uncertainty,” understood here as the amount of incomplete information (Galbraith, 1973)
and reducing the degree of “equivocality,” which describes the amount of ambiguity and
fuzziness of situational interpretations. In a project setting, examples are organizational
priorities, targets or mission statements.
We see the main building blocks of the framework in Figure 1. Environmental conditions
influence the requirements for information processing, while organizational design
influences the firm’s capacities for dealing with this problem. Following the contingency
approach and the results of prior empirical studies (Gladstein Ancona, 1990; Keller, 1994;
Tushman, 1979; Wong et al., 2011), we assume that firms will increase performance by
achieving a fit between requirements and capacities.
Key characteristics of the environment are specialization and interdependence.
We define “specialization” here as the degree of distinctness of links in the supply chain.
The more specialized the suppliers are, the more they will tend to develop distinct patterns
1 2 3 4
Requirements Fit Capacities
Environmental Organizational
for information for information
conditions design features
processing processing
Specialization Uncertainty Informational Organizational capability

interdependence equivocality amount, (integrative/modular) Figure 1.
richness Information
processing framework
Source: Adapted from Daft and Lengel and Egelhoff (1991)
BIJ of “functional specialization, time horizon, goals, frame of reference and jargon”
25,5 (Daft and Lengel, 1986, p. 564). Specialization increases coordination cost in three ways:
exposed to different environments, select specific sources of information and interpret
information in a specific way influenced by the in-group frame of reference, which tends to
filter out divergent opinions (March and Simon, 1958, p. 152). Poor information processing
may lead to poor performance, especially in competitive settings. Empirical studies have
1282 shown that that group-based specialization may decrease inter-group communication, and
decrease creative output (Allen, 1977; Katz and Allen, 1985). Interdependence between links
in the supply chain is a second central influence on the need for information processing (Daft
and Lengel, 1986; Wolf, 2005). Organizational units and thus supply chains that are tightly
connected for a specific task need to process high volumes of data to facilitate mutual
adjustment. Recent studies have highlighted the specific information processing impacts of
emerging market environments (Winkler et al., 2015) and explored the importance of
adapting organizational arrangements for supplier integration in new product development

to specific institutional contexts of, e.g., Chinese and US firms (Yan and Nair, 2015).
Key characteristics that shape the requirements for information processing are uncertainty
and equivocality. Following Galbraith (1973), we define uncertainty as “[T] he difference
between the amount of information required to perform the task and the amount of
information already possessed by the organization (p. 5). High uncertainty thus implies that
the organization lacks “relevant, accurate, timely, and concise” data. Organization members
face the problem of obtaining information to fill this gap. When uncertainty is high,
organizations will thus profit from the use of coordination mechanisms which allow for high
amounts of information transfer (Daft and Lengel, 1986; Tushman and Nadler, 1978).
The practical implications of equivocality strongly differ from those of uncertainty. In many
cases, a central problem of information processing is not the lack of data. Accurate, timely and
concise data may be available in large quantities. Even looking at the same heap of data;
however, different group may use different situational interpretations (March and
Simon, 1958; Weick, 1979). Equivocality refers to the degree to which the relevance of data
to the organizational situation is unclear. Situations with high equivocality thus lack a
common understanding of organizational actors on which rules ought to be applied, which
questions asked, which variables included in the analysis, which tasks considered most
relevant to corporate success (Daft and Lengel, 1986, pp. 555-557). Recent studies have,
e.g., looked at how project managers adapt their use of project follow-up tools to different
levels of uncertainty and equivocality (Sakka et al., 2016), or studied how the complexity of
tasks and the media richness of communication channels influence effective communication in
product innovation networks (Oke and Idiagbon-Oke, 2010).
Key characteristics of a firm’s capacities for information processing are the amount and
the richness of information that can be processed in the organizational setting. The amount
of information transferred by a mechanism indicates its potential for uncertainty reduction,
i.e., its information processing capacity. Relatedly, the “richness” of information is a term
indicating the effectiveness of such communication. As Daft and Lengel (1986, pp. 559-560)
note, “the key factor in equivocality reduction is the extent to which structural mechanisms
facilitate the processing of rich information.” The “richer” the information transferred, the
quicker is equivocality reduced c.p. Information richness is defined here as the degree to
which information can serve to bridge “different frames of reference or clarify ambiguous
issues to change understanding in a timely manner” (Daft and Lengel, 1986, p. 560).
Different organizational designs on the unit and team level will affect the amount and
richness of information that is transferred and thus shape the capacity for information
processing. How can firms improve their information processing capabilities? Srinivasan
and Swink (2015) use the information processing view to link studies on supply chain
integration, planning and operational performance. They provide empirical evidence that
both supply chain integration and technology-enabled supply chain management systems Technological
improve information processing capabilities and can have a significant impact on supply change
chain outcomes through increased planning comprehensiveness.
As key characteristics of organizational design, we look here at issues of organizational
capabilities, arguing that national-level preferences for more integrative or more modular
handling of organizational inputs will influence how firms adapt their information
processing capacities. This focuses on the more general firm level to link comparisons 1283
between firms to national starting conditions, based on differences highlighted by studies
on national comparative advantage (Wang and Kimble, 2010) and stylized national
working systems (Aoki and Dore, 2008/1994; Aoki et al., 2014; Bartnik, 2009; Boyer, 2003;
Itoh, 2008/1994).
Matching information processing requirements with firm capabilities matters: Keller (1994)
finds that the degree of fit between task characteristics and information processing predicts
the performance of R&D project groups. Relatedly, Gladstein Ancona (1990) shows
that consulting firms who matched strategy and external dependence performed better.
Earlier, Tushman (1979) had found that project work characteristics should be matched with
the degree of centralization in communication structures.
4. Empirical approach
We choose the case study method to explore key variables and motivations of industry
participants (Eisenhardt, 1989, 1991). The choice of firms is based on the theoretical
sampling approach (Eisenhardt, 1989; Meredith, 1998), which aims to “replicate or extend
the emergent theory by identifying extremes, polar types (opposite situations along some
dimension), or candidates for niche situations to help discover categories, properties, and
interrelationships that will extend the theory” (Meredith, 1998, p. 450). Following Meredith
(1998, p. 451), we aim to increase the generalizability of our findings by including multiple
divergent populations, notably automotive firms that operate in Japan, Germany and China.
Consequently, we selected firms based on the following inclusion criteria: major carmaker or
transmission supplier in Japan, Germany or China; informants involved in transmission
development from the technical or commercial side; and informants ready to openly discuss
transmission development strategy and process.
This approach resulted in interviews with development teams of five automotive OEMs
and five transmission suppliers between 2012 and 2015. The sample size of four and five for
OEMs and suppliers falls within the frequently recommended limits of four to ten cases,
respectively (Eisenhardt, 1989). Table I provides an overview of the firms and interviews.
Given the sensitivity of the data, firms requested not to be identified in our paper. While
confidentiality prevents us from listing the names of the firms, we will identifiers when our
conclusions are based on specific interview evidence.
All interviews took place on-site at the interviewed firms with interview times between
1.5 and 3 hours. Typically, firm participants came from specialist sections or departments
dealing with transmission R&D and included multiple hierarchical levels (see Table I).
Among the firms interviewed in China were joint ventures between Japanese and Chinese
firms as well as Chinese firms and subsidiaries of Japanese firms. Since our questions
focused on the challenges of transmission development in China, not on issues of ownership
or headquarters control, we consider this variety as unproblematic.
The interviews were semi-structured, using a guiding set of questions, while allowing
freedom to pursue pertinent issues flexibly. The structured instrument is provided in the
Appendix. While questions were adapted to reflect the specific firm conditions, the core
questions dealt with the following topics: transmission development process, recent
changes, evolution of project organization patterns, reasoning for decisions to focus on
CVT/DCT; inter-firm coordination of transmission development, OEM-system supplier
BIJ Interviewees
25,5 OEM Country of Unit No. of Interviewee management
ID /supplier origin location interviews functions level Date
J-OEM1 OEM Japan Japan 2 Powertrain Director, group October 2015,

engineering leader, senior August 2014
engineer,
1284 J-OEM2 OEM Japan Japan 2 Strategic research
engineer
Chief engineer (3) October 2015,
planning, automobile August 2014
R&D
G-OEM1 OEM Germany Germany 1 New product Senior Manager May 2015
development
JC-OEM1 OEM Japan/ China 1 Automotive Department head August 2012
China (joint development, development,
venture) production planning, senior manager (3)

marketing
G-Sup1 Supplier Germany Germany 1 R&D Senior manager February 2015
J-Sup1 Supplier Japan Japan 2 Control system Department October 2015,
development head, senior August 2014
engineer
J-Sup2 Supplier Japan Japan 2 Automotive R&D, Director, project October 2015,
electronic R&D general manager August 2014
JC-Sup1 Supplier Japan/ China 1 General Manager August 2013
China (joint management, R&D
Table I. venture)
List of expert JC-Sup2 Supplier Japan/ China 1 General Manager August 2013
interviews with China (joint management, R&D
carmakers and Tier-1 venture)
transmission suppliers Sum 13
collaboration issues, power balance, share of outsourcing and changes in these factors;
challenges of complexity, coordination of software/electronics/mechanics within and
between firms, collaboration style of domestic and foreign partners, effect of hybrid vs
gasoline model development.
Following the work of Lincoln and Guba (1985, pp. 328-331), we use prolonged
engagement, triangulation and peer debriefing to increase the “trustworthiness” of the
interview data: first, the interviews with most of the firms are part of a prolonged
engagement with the interview partners and firms over a long period and several research
projects. This allowed trust building and follow-up discussions for clarification. Second, we
use tertiary industry data, newspaper evidence and company data obtained during the
study to increase the generalizability of the data. Third, the findings were discussed in
several presentations and seminars with industry participants.
For data analysis, we reviewed the interview protocols to derive common themes and
categories from the analysis. We found that the key topics discussed here mapped well with
theoretical categories from the information processing literature and subsequently analyzed
the discussions with reference to the following eight categories: specialization,
interdependence, uncertainty, equivocality, informational amount, informational richness,
integrative capability and modular capability (see Figure 1). While this approach restricts
the explorative aspect of the analysis, we believe that the benefits of channeling the
discussion and linking it to a theoretical framework outweigh the drawbacks of reduced
explorative breadth.
In the following section, we present the results of these analyses by combining interview
evidence and data provided from the informants with tertiary data of recent industry trends
based on newspaper articles[1].
5. Analysis: hypotheses on changes of information processing in automotive Technological
ECU development change
Automobiles are controlled systems: mechanical parts receive orders by a growing number
of electronic control units (ECU). Like overworked middle managers, the control units are
asked to tease ever more performance out of their mechanical subordinates: spend less fuel,
go faster, cut out all waste, etc. To handle this stream of demands, designers dope ECUs
with ever stronger doses of electronics and software (Fujimoto and Park, 2012). 1285
Electronic control increases and grows in complexity; the number of ECUs per vehicle
has risen to about 50 in a mid-size vehicle such as the Golf to over 80 in a high-end vehicle
such as the Lexus. The increase in electronic control is part of a larger trend of
electrification. The share of electronics in total vehicle value is estimated to have increased
up from about 20 percent in 2004 to over 40 percent in 2015[2]. The share of software of total
vehicle value has almost tripled in ten years from 4.5 percent in 2000 to 13 percent in 2010.
Besides the increasing size, technological dynamics increase as well, the rate of
technological change is quicker than in traditional technological fields. The market leader
Bosch estimates that 80 percent of automotive innovation originates in electronics/software,
against only about 20 percent in mechanics. Increasing electronic control is a consequence of
these broader developments (Moessinger, 2008).
With growing numbers of electronic control systems, firms need to spend more effort to
integrate different technological fields on the controlled side (mechanical engineering) and
the controlling side (electric/software engineering). Understanding what aspects of
technological change impact information processing requirements and how is key to
understanding how organizations should react to it and for management to get some
control over reacting to such changes. The development of ECUs for cars increasingly
faces the challenge of integrating complex sub-systems between mechanical and electric/
software systems.
An engineer of a major automotive OEM illustrates the increasing complexity:
The number of ECUs has increased tenfold in 10 years, the number of production requirements
fivefold in ten years. […] The ECU for continuously variable transmission was 8 bit 20 years ago,
this has now changed to 32 bits. […] The total number of code lines for control systems in the car is
over 1.4 billion.
The following sections link the building blocks and key characteristics to the specific
question of ECUs and propose a number of hypotheses from this analysis. Figure 2
summarizes the propositions that we will gradually develop below.
5.1 Environmental conditions

The product architecture of automobiles in advanced economies is highly integrated
due to two growing trends: strong socio-political constraints regarding safety,
emission and fuel efficiency and high functional requirements by experienced
consumers (Pohl and Yarime, 2012).
Supplier specialization increases in ECU development as demonstrated by a number of
recent consolidations. The driving players here are often manufacturers of mechanical
components who aim to increase their knowledge in electronics: German supplier ZF bought
electronics specialist TRW in late 2014, becoming the world’s second largest automotive
supplier. The main goal of this acquisition was to achieve increased technological scope,
with TRW bringing specialized electronics expertise to complement ZF’s knowledge in
clutches, axles and transmissions and achieve benefits of size and breadth for further
technological development. Analysts speculate that ZF may also seek to diversify its core
transmission business, threatened by increasing complexity and the growth of electric
vehicles which do not use gearboxes, by mixing in a larger share of electronic components
BIJ Fit
Requirements Capacities
25,5 Environmental
conditions
for information for information
Organizational
design features
processing processing
Specialization Uncertainty Informational Organizational

interdependence equivocality amount, capability
richness (integrative/modular)
1286
P2a-b
P3a-c P4a-e
P1a-c
Propositions: P1a Rising ECU complecity increases tier one supplier specialization
P1b Rising ECU complexity increases supply chain interdependence

P1c Rising demand for cross-technical integration increases supply chain interdependence
P2a OEM equivocality strongly increases by higher specialization

P2b OEM uncertainty moderately increases by higher supply chain interdependence
P3a Efficient firms match equivocality increase with higher capacity for rich info. processing
P3b Efficient firms match uncertainty increase with capacity for processing higher amounts of information
P3c National differences determine preferences in information processing:
German OEMs: high >rich info., Japanese OEMs: high and rich info., Chinese OEMs: low and low info.
P4a Japanese OEMs: focus on information processing inside existing supplier networls, rather than outside netw.
P4b German OEMs: use both existing and new supplier networks
Figure 2. P4c Chinese OEMs: with quasi-open modular product arch.: establish industry-wide inter-module standards
Hypotheses P4d Chinese OEMs: with quasi-open modular product architectures: low focus on product innovation
P4e Chinese OEMs: with more integral product design practices: higher focus on product innovation
(Automotive News Europe, 2014; Clothier, 2014). Relatedly, the market leader Bosch
increased its control over the steering specialist ZF-Lenksysteme by buying all remaining
shares of this joint venture with ZF, thus gaining a stronger access over key steering
technologies for fuel efficiency, autonomous driving and electric vehicles (Boston, 2014;
Taylor, 2014)[3]. Analysts argue that these consolidations of German supplier networks in
core technologies have led to a recent re-organization in Toyota’s supply chain: In late 2014,
Toyota announced plans to integrate knowledge on braking systems at Advics, a joint
venture set up with its main suppliers. Founded in 2001 by Aisin Seiki (40 percent) and
Toyota Motor Corporation, Denso and Sumitomo Electric (20 percent each), Aisin’s share
was later increased to 55 percent. From 2016, Advics is expected to handle all Toyota brake
systems business, including all engineering, manufacturing and sales. A new factory will be
built by early 2016 (Greimel, 2014b; JCN Newswire, 2014; Nikkei, 2014).
As indicated by these developments, integrating diverse technological fields is a
central and growing challenge for ECU development (Fujimoto and Park, 2012).
Increasing technological complexity and non-routineness increases information
processing needs (Daft and Macintosh, 1981; Keller, 1994). From a theoretical
perspective, several related developments increase the benefits of relying on supplier
expertise. Increasing technological complexity which increases the benefit of subdividing
information processing tasks (Carter, 1995), decreasing inter-organizational
communication costs, which impose a tax on splitting up information processing
(Casson, 2001, pp. 26-27). Based on these observations, we posit:
P1a. Rising ECU complexity increases tier-one supplier specialization.
Based on our interview evidence, we find that three recent trends shape the task of
developing powertrain solutions. First, the complexity of the electronic control interface
between automotive OEMs and tier-one suppliers has increased dramatically over the last
ten years. Second, electronic control is model-specific – controllers are therefore not easily Technological
standardized across models, which leads to a recurring need for integration. Third, the change
development of ECU requires specialized knowledge from three technological areas:
mechanical, electronics and software. Development therefore frequently requires
cooperation between specialists from several companies in the supply chain.
While an increasing number of control units populate modern cars, the linkages between
electronic controls and mechanical parts increasingly resemble earthworms in a jar: while 1287
traditionally, engine, control, brake, etc. had individual controls, the electronic controls are
now intertwined and need to be much more tightly integrated to achieve new functionalities
such as the recuperation brake and improved fuel consumption.
An OEM engineer explains further:
For electronic control, there are multiple interfaces and this has become a big problem. The ideal
would be to just develop engine and powertrain and then simply mount it in the car, but in fact,
much cooperative effort is essential. The aim is to decide on a basic architecture of transmission
interface, functionality and physical wiring, but this is in fact still a struggle ( J-OEM1).
Thus, the integration of mechanical, electronic and software development increasingly
becomes an essential challenge for the development of vehicles with complex ECU. How to
achieve such integration between organizations? Information processing theory assumes
that with increasing task complexity, such integration will benefit from two factors: first
from the development of shared meaning between suppliers and buyers, which channels the
direction of joint efforts (Daft and Weick, 1984; Hult et al., 2004, p. 245); second from
organizational learning about the needs of interaction partners a common understanding of
key indicators. We assume that confronted with higher complexity and the availability
of specialized suppliers, firms will seek higher interdependence as a combination of
organizational memory about partner needs and continuous efforts to update this shared
understanding and may lead to reinforcing processes that improve inter-firm coordination
(Hult et al., 2004; Lindsley et al., 1995):
P1b. Rising ECU complexity increases supply chain interdependence.
P1c. Rising demand for cross-technical integration increases supply chain interdependence.
5.2 Information processing requirements

The technical evolution in ECU sketched out above give a strong upward push to
requirements for information processing in the supply chain, resulting from the increase in
both interdependence and specialization. Moreover, the overall surge in specialization
requires OEMs to increasingly outsource not only production but also R&D and design
functions and thus lose relative specialization to their tier-one suppliers.
Two recent examples that were extensively reported in the media show the resulting
problems for ECU development: Honda announced five recalls of its new Fit model since its
launch in 2013, citing a number of ECU software problems. As Automotive News Europe
reports (Greimel, 2014a), Honda’s new Fit model included substantial challenges, with a new
product platform, new transmission and hybrid drivetrain. Notably, the car was the first to
use the new “one-motor dual-clutch gasoline-electric drivetrain.” In reaction to the problems,
Honda changed R&D process organization design to start earlier with physical testing,
moving the in-vehicle testing forward to the research phase to test part integration earlier
and spot problems with interdependencies (Greimel, 2014a). For Nissan, a number of
problems with developing new CVT transmissions are reported prominently in the media in
late 2013 and CEO Ghosn commented that oversight over key supplier Jatco would need to
be increased. Nissan adapted its process organization here to include additional checkpoints
BIJ and control interdependencies. As Ghosn told journalists: “So we now have a process by
25,5 which, before we launch any new CVT, [JATCO] come before the Nissan executive
committee to explain all the measures they have taken to make sure there are no surprises”
(Chappell, 2013).
Higher complexity results not only from the multiplication of total ECUs used in
automobiles and the increasing interdependent linkages between mechanical parts that
1288 need to be coordinated by ECUs, but also and relatedly from a strong increase and
intermingling of technological fields.
For ECU development, automotive project managers need to solve a puzzle made of three
different materials that each have to be assembled based on their own logic and are tightly
linked to each other. Mechanical, electric and software components obey different design
logics, development sequences and priorities, as Fujimoto and Park (2012) point out:
mechanical products can start with relatively basic functional specifications but relatively
detailed structural specifications. Functional details are added later, based on physical
testing. By contrast, electric and software products will have more detailed functional
designs and the translation into structural designs of layout diagrams (electric design) or
source code (software) can be partly automated. Functional specifications of mechanical
products can be basic and incomplete at the beginning of the development process. The
functional specifications will be gradually completed based on the results of physical
prototype testing. By contrast, structural design needs to be relatively detailed and complete
early on to allow the construction of prototypes (Fujimoto and Park, 2012, p. 510). For
software especially, translation from functional to structural design is often automated, e.g.
diagrams in the Unified Modeling Language that describe use cases, classes and state
transitions can be translated automatically into the structural design form of source code
(Fujimoto and Park, 2012, p. 510).
As an OEM engineer explains in our interviews:
Mechanical parts can be produced fairly well [in-house]. However, software cannot be produced at
all, if there is no complete/clear specification. […] There are many managers with a background in
mechanics; few come from software. […] Since the car became hybrid, we outsourced many
components to suppliers. While mechanical components are easy to control, the quality of electric or
software components is difficult to evaluate until we test them in the car itself ( J-OEM2).
Overall, we posit that higher specialization in ECU development increases the difficulty of
processing information from more diverse technological fields and frames of reference. As
Sakka et al. (2016) show, such higher equivocality and the resulting complexity of the inter-
organizational coordination problem can also justify the use of more sophisticated control
mechanisms. Overall, such diversity increases information equivocality as organizations
need to cope with an increased “multiplicity of meaning conveyed by information about
organizational activities” (Daft and Macintosh, 1981, p. 211). Hence, it is proposed that:
P2a. OEM equivocality strongly increases by higher specialization.
Arguably, the breadth of technological fields that need to be integrated is the bigger
problem. Juggling a vast number of interdependent parts is of course nothing new to the
automotive OEMs. Like experienced puzzler players, organizing a huge heap of parts and
assembling them is the core business of automotive OEMs and they have developed
complex systems to deal with this challenge. This increase in organizational complexity
helps automotive firms process high information complexity (Sakka et al., 2016). Daft and
Macintosh (1981, pp. 212-213) discuss this as the archetype of engineering technology,
where large amounts of information need to be processed, but equivocality is relatively low,
as sophisticated organizational structures are in place. In the case of ECU development,
however, the push to higher supplier specialization comes with two side effects: increasing
technological interdependence and the relative newness of the interdependent technological Technological
fields, which makes output control more difficult. We thus posit that uncertainty will change
increase less strongly than equivocality for automotive OEMs. Hence, it is published that:
P2b. OEM uncertainty moderately increases by higher supply chain interdependence.
5.3 Information processing capacities 1289

The model posits that efficiency in integrating units across supply chains will result from
the fit between requirements and capabilities for information processing. Following the view
that a central goal of organizations is to reduce the lack of pertinent information
(uncertainty, Galbraith, 1973; Tushman and Nadler, 1978) and the lack of clarity on what
information is needed (equivocality, Daft and Lengel, 1986) we would expect firms to react to
a change in either of these two variables by adapting their information processing
capacities. This can mean the use of increasingly specialized control systems to track
partner behavior (Sakka et al., 2016) or the use of decision support techniques to guide
information processing under high uncertainty (Lipshitz and Strauss, 1997) and
equivocality (Sakka et al., 2016; Winkler et al., 2015).
We argue here that firms who do not react to the changing requirements will suffer
decreasing integration performance. Hence, it is proposed:
P3a. Efficient firms match equivocality increase with higher capacity for rich
information processing.
P3b. Efficient firms match uncertainty increase with capacity for processing higher
amounts of information.
We expect that technological change will result in distinctly different combinations for
Japanese, German and Chinese carmakers. For Japan and Germany, prior research indicates
that automotive production and supply chain coordination is performed quite differently
(Aoki et al., 2014), and shown different national preferences for the use of relational or
market-based coordination mechanisms (Dyer and Chu, 2000; Martin et al., 1995). By
contrast, empirical studies have highlighted problems for the transfer of complex
management systems to Chinese production environments and discussed cognitive
dispositions and behaviors as implementation barriers (Aoki, 2008; Gamble, 2010;
Zimmermann and Bollbach, 2015). Relatedly, problems of learning capacity in Chinese joint
ventures have been shown to lead to relatively low degrees of knowledge transfer (Nam,
2015). Buyer-supplier learning especially requires lengthy relationship development
(Duanmu and Fai, 2007) and even after long periods of time, partner learning may be very
limited, if incentives are no aligned to support such information processing (Nam, 2015),
which may lead to a detrimental lock-in for industry participants increasingly reliant on
system suppliers (Dongsheng and Fujimoto, 2004). Hence, it is proposed that:
P3c. National differences determine preferences in information processing: German
OEMs focus more on processing high amounts of information than on processing
rich information; Japanese supply chains focus both on high and rich amounts of
information processing in supply chains; Chinese OEMs, due to their stronger
reliance on system supplier knowledge, process low amounts of less rich knowledge
than their more established counterparts.
5.4 Organizational design: management issues for Japanese, German and Chinese firms
5.4.1 Architectural choice and organizational design. We use Fujimoto’s framework of
product architecture here to link organizational design to country characteristics and derive
BIJ hypotheses on how automotive OEMs from different countries will adjust to the pressures
25,5 on information processing pointed out above. Fujimoto distinguishes product architectures
along two dimensions: integral/modular and open/closed. The integral/modular dimension
refers to inter-component linkages: products with integral architectures have components
with complex inter-linkages. Slicing out chunks of components to produce elsewhere is
difficult, as many inter-linkages have to be taken into account and later re-integrated.
1290 Modular architectures, at the other end of this dimension, have simple one-to-one links
through standardized linkages; product architects can slice and dice components for
external design and production, as the parts will fit back into standardized slots later.
Typical examples of this are personal computers. The open/closed dimension refers to the
level of standardization: products with open architectures have industry-level standards,
while the standards of closed architectures are locked-up within the walls of single firms
(Fujimoto, 2007; Wang and Kimble, 2010).
German, Japanese and Chinese firms can be placed along the lines of these two
dimensions. In the remaining sections, we will derive hypotheses on their reactions to
changes in ECU technology from this link between product architecture and information
processing logics.
5.4.2 Organizational design issues for German and Japanese firms. How does national
context modify the outcome of inter-firm integration? Recent studies show international
differences in supplier integration, buyer learning and project outcomes, e.g. in US and
Chinese firms (Yan and Nair, 2015).
What management challenges of organizing ECU developments do firms experience? Our
interviews provide some insights on these points. First, we hear that OEMs increasingly find it
difficult to use simulations early on in ECU development projects to control quality, due to
problems in defining early on the quality standards and testing requirements. Current IT
systems do not provide sufficient functionalities to adequately track such projects, which
increases quality problems. Strong difficulties remain in implementing simultaneous
engineering for transmission ECU’s development. The reason for this is that product
architecture, interfaces and measurable development goals cannot currently be defined at the
beginning of the project at a sufficient level of detail. By consequence, mechanical, electronic
and software components are currently mostly developed sequentially, which increases
project duration. Using third-party ECUs in a modular fashion is described as highly difficult
by practitioners. Where a common design architecture does not exist, due to inter-company
differences in engineering standards, harmonizing engine, transmission and other
components is a huge challenge, as the meaning of code components and design features is
often not clearly understood (i.e. equivocal in our framework). Bridging such different frames
of reference required large investments of time and people and many loops of trial and error to
find out the meaning of design choices by the original designers.
What differences would we expect between Japanese and German organizational
settings in reacting to technological change? In the product architecture framework, a
comparative advantage of Japanese firms appears to lie in producing complex integral
products in working structures shaped by long-term employment, long-term supply chain
transaction practices and the resulting emphasis on cooperative, highly skilled teamwork
and problem solving (Fujimoto, 2008, p. 7). By contrast, German firms in the automotive
sector, while also emphasizing long-term interactions are arguably somewhat more modular
in their employee and supplier relationships. Differences between Japanese and German
firms are most apparent in the areas of human resource inputs (highly tied to the firm in
Japan, more openly switching between OEMs and lower tier suppliers in Germany) and
supplier relationships (less stable in Germany than in Japan with higher degrees of second
sourcing and supplier changes).
Arguably, this is less of a problem for Japanese OEMs within their established supplier Technological
networks and a substantial problem for them outside of these networks, especially with new change
strong suppliers who are not likely to agree to transferring their rich implementation
knowledge to their customers. Here, German OEMs may be at an advantage, due to their
broader experience with network expanding forms of external integration, such as M&As
and employee poaching. Hence, it is proposed that:
P4a. Japanese firms, characterized by integral practices of supplier relationships, will 1291
focus their information processing efforts inside existing supply chain relations to
improve their information processing, following growing processing requirements
in ECU development.
P4b. German firms, characterized by more modular practices of supplier relationships in
comparison to Japanese firms and faced with more powerful tier-one counterparts,
will use both existing suppliers and new suppliers to improve their information
processing, following growing processing requirements in ECU development.
5.4.3 Organizational design issues for Chinese firms. Uncertainty and equivocality are
inherently high in dynamic emerging markets, which pose a specific problem for decision
makers, who have to operate under “foggy” conditions that prevent them from seeing far
ahead. Decision-making theories offer limited guidance on how firms should improve
visibility by increasing their information-processing capabilities (see Winkler et al., 2015 for
a rare exception).
China’s comparative advantage at the end of the twentieth century arguably lies in labor-
intensive modular architecture goods. Firms in a multitude of businesses “rely on mix-and-
match of standard equipment and low-wage temporary workers from low-income regions of
inland China” (Fujimoto, 2008). Wang and Kimble (2010) take up Fujimoto’s framework to
argue that car manufacturing in China has reached a state of “quasi-open modular
architecture,” where components and modules are mixed and matched more freely by firms,
while not yet having achieved industry standard (Wang and Kimble, 2010). They argue that
one of the challenges for Chinese carmakers such as Geely lies in:
[c]ombining components from cars designed with an integral or closed modular architecture (the
Citroen ZX and Charade) to build a car with a quasi-open modular architecture (the Maple) (Wang
and Kimble, 2010, p. 17).
As Wang and Kimble explain, the trick appears to consist in standardizing interfaces and
plan for modularity from the very beginning of the design process, which Geely increasingly
refined over several model phases: Geely’s engines can fit into bodies modeled on different
foreign producers, and conversely, car bodies produced by Geely can accommodate a
number of other engines. Geely has also worked on standardizing module components, in
part copied from models of its more established competitors such as Toyota and produced in
large volumes to achieve substantial cost reductions, producing engine types at up to a third
of the cost of more established competitors by standardization, economies of scale and by
using part of the supplier networks of western and Japanese competitors (Wang and Kimble,
2010, p. 18). Linked to the discussion above, such standardization can substantially reduce
the requirement for information transfer: by reducing or eliminating the requirement for
mechanical adaptation and the use of established solutions by suppliers that reduce the
need to adjust electronic and software components. The strong increase in complexity and
interdependence pointed out above seems to give makers like Geely two choices: either
accept substantial extra work for system integration and thus arguably compete with
western and Japanese incumbents in their own turf of highly integrated highly skilled
production. Or hand over substantially more control to tier-one systems integrators, while
BIJ also transferring a bigger share of margins to them and outsource this part of systems
25,5 integration as much as possible, concentrating on linking standard modules of established
leading tier one suppliers. How well OEMs like Geely can standardize and integrate the
electronic and software connections between the main modules will be a central concern for
firms with this business model.
Qoros, established in 2007, provides another recent example of a similar strategy. Being a
1292 start-up company, Qoros represents a more drastic experiment in trying to mix-and-match in a
modular fashion not only established modules and supplier networks of key components, but
also human capital: TRW, a major supplier to VW, GM and Ford (and recently bought by ZF,
see above) supplied the complete passive security system of the Qoros 3 Sedan. Engines come
from Austrian supplier AVL, while DCT transmissions are bought by the German market
leader Getrag. The top management of Qoros is recruited from former top executives of large
incumbents such as VW, GM, BMW, Mini Jaguar Land Rover, Saab and Volvo. Other main
suppliers include Harman, Magna, Bosch and Continental (Krust, 2013).

We argue here that this presents an alternative approach to coping with emerging
market uncertainty and equivocality (Winkler et al., 2015), with emerging market OEMs
reducing their need for information processing by standardizing interfaces for key
components. Similar to the “Mutual Adjustment” strategy for information processing
described by Bensaou and Venkatraman (1995, p. 1484), firms avoid the investments in (and
dependence on) deep mutually binding relationships with single suppliers. Increased
interface standardization and lower consumer expectations in the emerging markets
increase the scope for using this approach.
We argue that:
P4c. Chinese firms, characterized by modular and quasi-open practices of supplier
relationships, will use new supplier networks to copy, adapt and finally spread in
the industry open standards for central input modules.
Wang and Kimble (2010) estimated in 2010 that about a third of all Chinese cars were
already produced in quasi-open architectures by Chinese carmakers such as Gery, Qoros or
Chery, BYD, and Great Wall. They cite the example of Mitsubishi and Delphi to show how
established component makers reinforce the shift towards this architecture:
Mitsubishi is selling its engines to at least 21 different carmakers in China and Delphi’s engine
management system has become modular so that it can be used with any Mitsubishi engine in
order to increase its sales (Wang and Kimble, 2010, p. 17).
While Western and Japanese makers are wary of this development in the long term, current
market figures are still showing the dominance of the incumbents, with large market shares
by foreign makers in the Chinese domestic market and domestic makers reaching less than
20 percent market share (Colum, 2015; The Economist, 2013). This may change rapidly once
Chinese firms catch up more forcefully and may be supported by political sanctions to
foreign firms in China. However, it should be noted too that growth in size may not lead to
growth in technological prowess: there is the danger to Chinese automotive firms to become
locked into a market dynamic that does not provide sufficient incentives for the firms to
invest and start competing abroad in the high-end technology sectors. Dongsheng and
Fujimoto (2004) provide a cautionary tale about the Chinese motorbike industry, which
shows that becoming a mass producer does not have to lead to technological leadership.
Progressing too far along the path of quasi-open architecture may prove a barrier to
technological innovation, as seems to have happened in the Chinese motorcycle industry.
Dongsheng and Fujimoto (2004) argue that strong reliance on horizontal cooperation with
suppliers has lowered incentives to innovate and caused motorcycle assemblers to be stuck
in the imitation of foreign makers.
We argue that the long-term approach to supplier coordination, i.e. to the reduction of Technological
supplier related uncertainty and equivocality of Chinese OEMs will depend on the type of change
products (modular vs integral) and the related information processing requirements
(Bensaou and Venkatraman, 1995; Winkler et al., 2015). Firms that focus on less information
processing intensive products, e.g. by aiming to copy existing models of incumbents will
tend to aim for looser ties to their suppliers and engage less in boundary-spanning activities
with suppliers such as joint planning, continuous improvement or joint design. By contrast, 1293
Chinese firms with the long-term aim to develop complex, innovative products and compete
with incumbents head-on will tend to invest in a strategy that ties them closely to selected
supplier in a mutually binding relationship, similar to what Bensaou and Venkatraman
(1995) describe as “electronic interdependence,” which depends on “rich and intense”
information exchange between supplier and carmaker (p. 1482). We observe the latter
behavior more strongly in Japanese-Chinese joint ventures in our sample.
We thus argue that:

P4d. Chinese automotive firms that use modular and quasi-open product design
practices and supplier relationships will focus on imitating focal models of foreign
makers, less on producing new technology to compete with market leaders
in export markets.
P4e. Chinese automotive firms that use integral product design practices and supplier
relationships will focus on producing new technology to compete with market
leaders in export markets.
6. Theoretical and managerial implications

6.1 Theoretical implications
Our study illustrates how increasing technological complexity affects inter-firm
development processes. Our findings contribute to two discussions in this area. First, our
results relate to studies on in-house and outsourcing choices in the automotive industry.
Prior studies have characterized the division of labor and the division of knowledge in
automotive development as “loosely coupled” (Brusoni et al., 2001, pp. 615-617): carmakers
outsource substantial parts of component production while retaining substantial knowledge
for managing component interdependencies to achieve systems integration (Sako and
Murray, 1999). Brusoni et al. base this description on two assumptions: unpredictable
interdependencies between the (largely outsourced) components and an even rate of change
of component technologies (Brusoni et al., 2001, pp. 615-617). We would argue here that both
assumptions may not hold true for some types of transmission development: simpler
architectures for low-cost hybrid vehicles may mean that product interdependencies
become simpler and may see industry architecture for some models move to “de-coupled”
industry organization, similar to the PC industry (Brusoni et al., 2001), which would play to
the strengths of new competitors from emerging markets that are experienced in this
form of quasi-open, modular architecture for low-priced cars (Fujimoto, 2008; Wang and
Kimble, 2010). The lower complexity implies that carmakers need to retain less overlapping
component-specific knowledge and can focus more on architectural knowledge
(Takeishi, 2002), applying mix-and-match strategies with largely standard components
(Fujimoto, 2008; Wang and Kimble, 2010). By contrast, high-end models with higher
demands on complex, efficiency-oriented hybrid engine arrangements may push in the
opposite direction and lead to the development of tightly coupled, vertically integrated
structures, similar to mobile phone systems (Brusoni et al., 2001, p. 615). Well-established
and supported communication channels matter in this regard: long-term orientation
toward suppliers has been shown to improve buyer-supplier coordination (Toni, 1999) and
BIJ the long-term orientation of inter-organizational communication with supply chain partners
25,5 that Japanese carmakers prefer is a relational competency that helps firms in sustaining
a competitive environment (Paulraj et al., 2008).
As markets and variants increase, we may see all three variants as alternative
approaches for specific car models and consumer layers.
Second, we expand on prior findings regarding the “equifinality” of inter-firm
1294 relationships: Bensaou and Venkatraman (1995) argued, based on a US/Japan comparison
that “there are multiple ways to balance the needs and capabilities for information
processing” (p. 1486) and that national institutional context influences organizational trade-
offs in supply chain coordination, as Yan and Nair (2015) show in a recent comparison of US
and Chinese firms. Our findings contribute to this argument by exploring different reactions
to technological change, exploring how German and Japanese firms, who both operate in
institutional settings of “nonliberal capitalism” (Streeck and Yamamura, 2005) react
differently based on other differences in their industry environments and by discussing how
emergent market conditions add further options and constraints. How firms respond to
technological change depends to some extent on institutional aspects of firm context:
Japanese, Chinese and German firms each follow different strategies linked to their
production and supply chain environment. This links to discussion of national production
systems (Hall and Soskice, 2001; Yamamura and Streeck, 2003) and recent studies
on the context-dependent nature of industrial practices in the automotive industry
(Aoki et al., 2014; Staeblein and Aoki, 2015; Zimmermann and Bollbach, 2015).
6.2 Management implications

The recent technological changes pointed out above increase uncertainty and equivocality
in the development process and cause substantial difficulties even to established OEMs.
Arguably, the OEMs will need to adapt both the structure and membership of their supply
chains and the shape of their supply chain integration mechanisms on the team level to
these changing demands for information processing. OEMs will thus need to find ways to
increase both internal and external integration. Prior studies on supply chain integration
suggest that internal and external forms of integration may follow different dynamics
and should thus be evaluated as separate concepts (Braunscheidel and Suresh, 2009;
Flynn et al., 2010), while their performance effects are best seen as results of interdependent
configurations (Das et al., 2006). Achieving substantial benefits from integration with
suppliers and customers may require crossing a threshold level of internal integration first
(Flynn et al., 2010).
How to adapt organizational design? OEMs wanting to adapt complex existing internal
structures to the changing demands for information processing should focus first on
improving internal capacities. Two focal points for these initial activities should be
concentrated on improving the amount and richness of information flow. First to boost the
size of information processing by forcing standard processes to allow the amount of
information processing to increase substantially. Bosch provides a good example of what
this might mean for transmission development in recent years: first by pushing forward a
broad number of standardization initiatives to integrate internal processes around the
AUTOSAR standard between 2006 and 2012 (Moessinger, 2008) and more recently by
increasing the internal efficiency of handling these standard processes by establishing an
integrated development environment for AUTOSAR across the base system Eclipse (Reiter
and Sasidharan, 2013). A second step should be to boost the internal capacity to process
higher richness of information, i.e. to understand the meta-knowledge necessary to integrate
across technological areas in transmission development, to write process and quality
standards in substantial detail and to define interfaces with a degree of precision that
allows for a broader use of simultaneous engineering. For this, both internal training,
mixing-and-matching with suppliers in joint ventures and forced co-location of resident Technological
engineers and possibly poaching of employees from key suppliers are options. An approach change
to reduce uncertainty and equivocality of decision making is discussed by Winkler et al.
(2015), who propose future-oriented Delphi studies to improve predictions for emerging
markets such as the Chinese automotive industry.
Overall, we find symptoms of two larger trends: first increasing specialization and
technological linkages and second a need to increase external supply chain integration 1295
beyond traditional structures, which is arguably harder for Japanese OEMs who are more
focused on close ties in their traditional networks, reinforced over many cycles and arguably
intertwined to the point of inefficiency in some respects. Our main assertion regarding this
inefficiency is that tight links in the Japanese supply chain networks allow for a level of
supplier reactivity that harms OEM efficiency. Notable examples of this include the high
degree of customized, OEM-specific and model-specific parts, the lack of complete part
specifications and overall the routinized habits of established tier-one suppliers to agree to
OEM demands, change standard parts, accept last-minute design changes, etc. These are
aspects of the Japanese OEMs’ system of supplier integration that may bog down
information exchange and limit the potential for Japanese OEMs to profit from scale effects
and external sourcing possibilities. While these arguments seem plausible to us, we must
note that these are only hypotheses at this stage, supported only by our own impressions
and anecdotal evidence and thus the next stage of our research will include testing these
assertions more broadly.
A central challenge to Chinese OEMs appears to lie in walking the thin line between
using a temporary advantage and not becoming overly dependent on it. On the one hand,
using the advantages of quasi-open modular production settings provides obvious
advantages, allowing some flexible OEMs such as Geely and Qoros to increasingly mix-and-
match inputs from specialized tier-one suppliers. On the other hand, we see from examples
in other industries, that such setup may lead to over-dependence on copycat behavior and
lower incentives for the R&D investments and organizational changes to become truly
competitive through technological innovation. This merits further research.
Notes
1. Note that we do not make direct links between the newspaper articles and the interviews for
reasons of confidentiality and the articles are selected to be representative of general trends that
we observe in the interviews, not necessarily because they deal with firms in our sample.
2. Saeki (2013) reports that car electronics holds a share of about 35 percent in the total value of
Japanese vehicles, based on 2011 data from the Japanese Automotive Parts Association.
3. This side deal also helped ZF to close the acquisition of TRW, since it removed concerns for
competition regulation (Clothier, 2014).
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BIJ Appendix. Interview guidelines
25,5
Transmission development
(1) Please describe the transmission development process in your firm and how you collaborate
with other firms.
(2) Have recent changes in your market, competition or technology environment led to changes in
1300 your process for transmission development?
(3) Has your project organization for transmission development changed, and if so, how?
Inter-firm development process

(1) Has the collaboration between OEM and supplier changed, and if so, how?
(2) Has the power balance between OEMs and suppliers changed and if so what are the effects of
this change?
(3) What role do automotive transmission standards play in your firm and how do you choose
whether to focus e.g. on the CVT or DCT standard?
(4) Has the share of outsourced parts changed in your firm’s transmission development?
Complexity
(1) Has the complexity in the transmission development process changed recently, and if so, how?
(2) How does your firm deal with the challenge of integrating mechanical, electronic and software
components during transmission development?
(3) Have you observed differences in the collaboration styles of foreign and domestic OEMs/
suppliers for transmission development?
(4) Are there specific challenges in transmission development for the Chinese market and with
Chinese OEMs/suppliers?
(5) Are there differences in your internal development process for transmissions for normal,
hybrid and electric vehicles respectively?
(6) Does the collaboration between suppliers and OEMs change depending on whether you have
normal, hybrid or electric vehicles?
Notes: The form of the questions above were slightly adapted case-by-case depending on the interview
partner and circumstances, e.g. depending on whether we talked to subsidiary or headquarters
managers, OEMs or suppliers, firms located in China or not, etc. The topics and contents above were
discussed in all interviews.
About the authors

Dr Roman Bartnik works as a Project Manager in the automotive industry and as an Adjunct Lecturer
at the Cologne Business School. Dr Bsartnik holds a Doctoral Degree in Business Studies from the
University of Duisburg-Essen. Over the last years, he has worked as a Project Manager and Project
Purchasing Manager in the automotive and software industries. From 2014 to 2016, he has lead a
federally funded project on electric mobility in the automotive industry in Japan, Korea, China and
Germany, focusing on issues of technology change and impacts on supplier negotiation strategies. His
recent research has been accepted for publication at journals including Technovation, Management
Decision, Benchmarking: An International Journal, Ethics & Behavior and Annals of the Society for
Industrial Studies, Japan. His general research interests include international supply management and
supply chain operations, as well as international project and innovation management. Dr Roman
Bartnik is the corresponding author and can be contacted at: roman.bartnik@uni-due.de
Dr Youngwon Park is a Professor at the Saitama University and an Associate Professor at the Technological
Manufacturing Management Research Center at the University of Tokyo, Japan. Dr Park holds a change
Doctoral Degree in the Department of Advanced Social and International Studies from the University
of Tokyo, Japan. His articles have been published in journals including International Journal of
Technology Management, Business Horizons, International Journal of Information Management,
International Journal of Production Economics, Journal of Business Research, Management Decision,
Benchmarking: An International Journal, International Journal of Business Excellence, International
Journal of Procurement Management, International Journal of Service and Operation Management, 1301
International Journal of Logistics Systems and Management, Akamon Management Review,
Organisational Science, Annual Bulletin of the Japan Academy of International Business Studies,
Journal of Science and Technology Studies, Journal of Information and Communication Research. His
research interests are in technology management, international business, IT strategy and global
supply chain management.
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Roman Bartnik Received 14 March 2016

Idiagbon-Oke, 2010) to specific degrees of information processing complexity. Other researchers

2. Supply chain integration for technology development

3. Theoretical framework: information processing and integration

Specialization Uncertainty Informational Organizational capability

adapting organizational arrangements for supplier integration in new product development

J-OEM1 OEM Japan Japan 2 Powertrain Director, group October 2015,

venture) production planning, senior manager (3)

5.1 Environmental conditions

Specialization Uncertainty Informational Organizational

P1b Rising ECU complexity increases supply chain interdependence

P2a OEM equivocality strongly increases by higher specialization

5.2 Information processing requirements

5.3 Information processing capacities 1289

suppliers include Harman, Magna, Bosch and Continental (Krust, 2013).

We thus argue that:

6. Theoretical and managerial implications

6.2 Management implications

communication, knowledge exchange and buyer performance”, Industrial Marketing

Inter-firm development process

About the authors

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