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Recombining Activity Domains in Activity Systems: A Modularity Perspective
Conference paper

Recombining Activity Domains in Activity Systems: A Modularity Perspective

Daniel Albert
Academy of Management Annual Meeting Proceedings, v 2014(1)
Jan 2014
DOI: https://doi.org/10.5465/ambpp.2014.11887abstract

Abstract

A firm’s system of activities can be decomposed into sub-domains of activities, which can adapt and innovate almost independently from one another because of few interdependencies across domains. Such activity domains can be subject to recombination; that is, they can merge with other domains or even exit the activity system. While recombination has been identified as a powerful mechanism of system-wide renewal, it is less clear what role the individual domains play in this mechanism. Hence, in this study, I address this gap by focusing on the characteristics of activity domains, representing the modularity in activity systems, to theorize about the likelihood of the recombination of a focal domain. Applying a Cox semi-parametric model to test the hazard-rate of recombination in a sample of 1027 activity domain years in 166 individual activity domains in the European banking industry between 2000 and 2011, I find modularity to have opposing effects depending on which hierarchical level of a focal activity domain one considers. External modularity, the number of co-existing domains in the same activity system, increases the likelihood that an activity domain will undergo recombination. Internal modularity, the decomposability of the domain into sub-domains, decreases the likelihood of recombination. These effects are partially reversed when taking into account the relative importance of domains and sub-domains.

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