Breaking Mirror for the Customers: The Demand-Side Contingencies of the Mirroring Hypothesis

Abstract

Much of the literature on modularity suggests that increased product modularity is associated with advantageous increases in organizational modularity, otherwise known as the mirroring hypothesis. However, there is growing contradictory evidence. This study proposes demand-side contingent factors that would reduce the extent of mirroring between product and organization. Specifically, it is proposed that firms adopting industry-standard modular architecture would “break the mirror” (i.e., remain relatively more integrated) if the target customers have high performance or reliability demands. Logit regression is employed to test the proposed hypotheses on the cross-sectional data collected from 173 computer systems integration firms (177 strategic business units). Results support the proposed demand-side contingent factors, i.e., an increase in target customers’ performance and reliability demand indeed reduces the extent of mirroring for systems integration firms in this industry.