The Knowledge Base of Products: Implications for Organizational Structures

This paper investigates the impact of two dimensions of product knowledge bases on organizational structures. The first dimension, knowledge breadth, measures the complexity of a product. The second dimension, knowledge depth, measures the extent to which the knowledge embedded in the product can be used in different contexts. An agent-based simulation study is carried out to analyse the structural characteristics of organizations that emerge when self-interested agents select partners to combine their expertise and produce together. Agents learn from their interactions, which shapes their choice of partners in the future. The results reveal that multi-product companies with fewer inter-firm relationships emerge when products are complex and knowledge is highly reusable in different contexts. A network of specialized firms is a dominant organizational structure when products are complex and deep. The results are demonstrated through a brief case study of the history of the computer industry.