Setting the Stage: The Interplay of Firm Boundary and Learning at the Opera

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You are invited to attend the System Dynamics Seminar Series being held on Friday, September 10^th from 1:00-2:pm EST via Zoom: https://mit.zoom.us/j/96764037673 (password: SDSSFA21). Our guest speaker will be Carolyn Fu

Abstract: Vertical integration has traditionally been understood as having distinct advantages for systemic innovation – enabling firms to experiment with different combinations of resources, so as to achieve valuable innovations in product architecture. However, the possibility for disintegrated markets to also provide such innovations has not been well investigated. In this study, we see that if specialized producers in a disintegrated market are motivated by reputational concerns, they likewise experiment with valuable product architectures they can participate in. The market then offers a multitude of systemic innovations that a given firm can leverage. Furthermore, the availability of these systemic innovations in the market means that greater integration can in fact be detrimental to a firm’s attempts to innovate. This study examines this opportunity and challenge through the surprising disintegration of the Royal Opera, a firm that sought to integrate for the sake of systemic innovation but ultimately abandoned this in order to leverage the novel product architectures offered by specialized producers in the market. This study utilizes both qualitative archival analysis and a computational simulation to clarify the benefits that market-level search for systemic innovations can offer, and demonstrate how a firm can in fact undercut this value by attempting to integrate.

Brief Bio: Carolyn Fu is a Ph.D. Candidate in Economic Sociology at MIT Sloan. Her research examines how organizational learning mechanisms (e.g. interdependence, cognition) interact with sociological mechanisms (e.g. status, legitimacy) to influence how and where valuable innovations arise and the strategic implications of this. She uses both qualitative archival methods and computational simulations in her work.

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