New product advantage infused by modularity: Do resources make a difference?

Abstract Given the plethora of new product introductions, managers often embrace modularity (i.e., decompose product or process design into components or sub‐tasks, respectively) as part of new product development (NPD). Although modularity increases overall firm performance, a holistic view is missing for the relationship between modularity and new product advantage (i.e., a new product's superiority relative to competing products). In addition, extant research has not examined modularity in juxtaposition with allocated resources, so it is unclear how their interplay will unfold as means to foster new product advantage. Accordingly, by building on resource theories (resource‐based view and resource orchestration theory) and extant research on NPD, we bridge the modularity‐new product advantage gap in a survey study of managers involved in NPD projects. Overall, we view product modularity and process modularity as NPD capabilities and contrast their roles in NPD. Our findings show that product modularity, rather than process modularity, directly fosters new product advantage. More interestingly, resources form different contingency factors for the two types of modularity to influence new product advantage. Resources allocated to marketing stages constrain product modularity's positive impact, but they create a synergy with process modularity to increase new product advantage. On the contrary, the synergy between resources allocated to technical stages and product modularity generates more benefit for new product advantage, but resources allocated to marketing stages do not have a contingency effect on process modularity. These findings help firms understand how to leverage modularity to develop superior new products. At the same time, they offer insights into allocating and bundling different resources across NPD stages as the range of product modularity and process modularity vary in NPD.