The Impact of Component Sharing on Quality: An Empirical Study in the Automotive Industry

Component sharing – the use of a component on multiple products within a firm’s product line – is widely practiced as a means to offer high variety at low cost. While many researchers have examined tradeoffs involved in component sharing, little research has focused on the impact of component sharing on quality – defined in this paper as component reliability. The design literature suggests that a component designed uniquely for a product will result in higher quality due to the better fit of the component within the architecture of the product. The traditional learning curve literature suggests that higher volume of a component will increase component reliability. Sharing a component across multiple products increases volume and hence should increase reliability. However due to difficulties in transferring learning across products, we anticipate that this volume effect will be moderated by the number of products needed to achieve any given volume. Using data from the automotive industry, we find strong support for the hypothesis that higher component reliability is associated with a component that has been designed uniquely for a product. This finding suggests that the popular design strategy of component sharing can in some cases compromise product quality. We also find support for the hypothesis that higher component reliability is associated with higher cumulative component volumes, and we find that this effect is moderated by the number of models needed to achieve the cumulative volume. These effects present designers with a conundrum: both designing a unique component for each product application and sharing a component across multiple products can increase reliability. We evaluate the relative strength of each of these effects within the context of our data and develop insight on the situations in which each effect dominates the other.