Effects Of Modularity Upon Discontinuous Industrial Innovation

With the development of information technology and the deepening of economic globalization, competition between enterprises is increasingly fierce, and enterprises are faced with more complex external environment and more uncertain factors. So it does not satisfy the enterprise for remaining competitiveness and achieving sustainable development that only making innovations in current market, then discontinuous innovation become an important way for an enterprise or industry to achieve leapfrog development. Modularity is a better way to deal with complexity and uncertainty, it can effectively reduce the R&D costs and improve the innovation ability. However, there has been little attention paid to link modularity with discontinuous innovation and less research has been quantitative. Our research aims to investigate the relationship between modularity and discontinuous innovation at industry level.Taking automobile industry as an example, we use patent data of global automobile industry to measure industry modularity and discontinuous innovation. And then, based on the time-series data of 1981-2000 years, we use co-integration test, error correction model and impulse response to analyze the impact of modularity upon the discontinuous innovation in the automobile industry. It is found that there is a long-term and equilibrium relationship between modularity and discontinuous innovation in the automobile industry. When short-term fluctuations deviate from equilibrium state, strong amendments would be made by ECM. No matter it is long-term or short-term, there is highly positive correlation between modularity and discontinuous innovation in the automobile industry, and it is more significant in the long term. When discontinuous innovation suffers from a one-standard deviation shock in modularity, there is no response at once, but it becomes stronger until it reaches the peak, then it stabilizes step by step and shows a trend of gradual convergence. Therefore, automobile industry in China should adopt modular development strategy to enhance the innovation ability of automobile manufacturers and automobile component suppliers, thereby promoting the upgrading of automobile industry.