Management of Technology and Innovation in Japan

Suppliers’ Involvement in New Product Development 245
On the other hand, the negative relationship between functional modularity and
the choice of the DS system shows that even when supplier has been equipped
with high level capability of designing auto parts, the ill-defined functional interdependence
among auto parts tends to increase the coordination costs during the
development process. Auto maker would rather like to design the parts themselves
and internalize the likely adverse externalities in this situation. As we can see that
the DS parts are not complicated ones, the in-house making of design drawings of
these parts is not considered to cost large amount of engineering hours.
It is also interesting to see that variables reflecting structural modularity
showed no impact on the choice of supplier involvement patterns, which implies
that even when the physical interfaces between auto parts are ill-defined, they will
not pose a severe challenge to the inter-firm coordination. This point was confirmed
during the interview with the respondent who commented that the interface
complexity of auto parts seldom posed problems during the design process. The
reasons for this result may lie in the routine practices of auto maker A and supplier
B in Japan. After establishing a very solid collaborative relationship, timeconsuming
negotiations during design changes of physical interfaces are likely to
be replaced by collective problem solving as long as the functional interfaces and
correspondently, the responsibility boundaries are defined clearly beforehand. As
one result, such practice is very likely to assure the optimal structural design to be
achieved.
Internal Complexity of Auto Parts and the Choice of DA and DE
System
The result that the internal complexity of auto parts, also as an indicator of supplier’s
capability, is positively associated with the outsourcing of detailed designing
is compatible with the argument by Asanuma (1989) that the more know-how
suppliers accumulate for designing auto parts, the greater the likelihood that design
outsourcing will be done by the auto makers. It also backs up the analysis of
Fujimoto on the supplier system in Japanese auto industry that “bundled outsourcing”
to first-tier suppliers are conducted together with long-term transaction and
fierce capability competition among small number of suppliers. By using the term
of bundled outsourcing, Fujimoto points out that not only the first-tier suppliers
conduct subassembly of the parts procured from the second-tier, but also they
carry out a bundle of tasks such as design, testing, manufacturing and inspectionfree
delivery (Fujimoto 1997). When comparing such routine practices by the
Japanese auto makers to the modularization trend from 1990s in Europe and
America, we can interestingly find that the fundamental thought of modularization
to reduce complexity and promote parallel engineering has been embodied in the
supply chain management of the representative Japanese auto makers since 1970s
(Fujimoto 2001). The major difference is that relative larger unit of modules are
procured in European and American auto makers and the physical interface determination
is given priority to facilitate the reorganization of their supplier system.
The results from logistic regression analysis here show that the bundled out-