Situated Experience vs Modularity: Effects on Distributed Project Work and Project Margin

Multinational engineering and manufacturing firms compete by distributing project work across their networks of geographically dispersed subsidiaries, but remain wary of associated costs. A widespread solution to mitigate this concern and leverage corporate networks is the adoption of modular product architectures, which reduce uncertainty in coordinating remote units through interface standardization. However, accommodating unique customer requirements—an inherent feature of project-based operations—often forces project teams to devise technical solutions that depart from modular architectures (i.e., project solution modularity is low). As a result, project-based firms may fail to sufficiently leverage their global networks, missing an important source of differentiation and profitability. We argue that firms can overcome the negative effects of low project solution modularity by staffing project teams with technical managers familiar with the solution needed to address the specific customer requirements (i.e they have high situated technical experience). We investigate this contention through a field study of 97 projects that a global engineering and manufacturing company executed over a seven-year time span. Our findings show that project solution modularity and situated technical experience have positive but mutually cancelling direct effects on the distribution of project work, and indirect effects on project margins through distributed work. We also find that project solution modularity and situated technical experience directly affect project margins, the former negatively and the latter positively. These results contribute to the distributed work, product modularity and team staffing literatures, providing novel insights into strategies multinational companies can leverage to distribute work and improve projects’ performance.