


































Advances in Politics and Economics
ISSN 2576-1382 (Print) ISSN 2576-1390 (Online)

Vol. 7, No. 2, 2024
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74

Original Paper

A Review of Research on Networks of Modular Production
Jiali Chen1*

1 China-asean school of economics, Guangxi University, Nanning, Guangxi, 530000, China
* Corresponding author, E-mail: 941025542@qq.com

Received: April 19, 2024 Accepted: May 11, 2024 Online Published: May 25, 2024

doi:10.22158/ape.v7n2p74 URL: http://dx.doi.org/10.22158/ape.v7n2p74

Abstract

With the development of science and technology, the deep integration of products and technologies has

made modularity in the field of industrial products has achieved good results, from IBM-360 computer

to Volkswagen's MQB platform can be seen, in various industrial fields, the research and practice of

modular production network has become one of the focuses of industrial upgrading. Based on the

current research needs, the existing modularization literature is reviewed from three aspects:

industrial modularization, industrial cluster modularization and modular production network.

Keywords

modularization, industry aggregation, industry modularization

1. Introduction

In today's world, science and technology are developing rapidly, the global situation is changing rapidly,

digital, artificial intelligence and other information technologies are constantly reshaping the industrial

development trend, and the rapid and dynamic competitive environment is also constantly promoting

entrepreneurs to innovate and develop new business paradigms and industrial organization forms. At

the same time, factors such as the gradual blurring of industrial boundaries and the rise of customer

customization demand have spawned a new industrial value chain system and ushered in the modular

era.

The research on modularity theory can be traced back to the concept of "complexity architecture",

which was proposed by Herbert, an American management scientist. Simon came up with it in the

1960s. He used clocks and watches as an example to analyze the methods of solving complex problems

by independent subsystems, but did not put forward the concept of "modularity". After the large-scale

modular production of IBM computers, the academic community began to pay attention to the modular

production mode, and its theory and mechanism were discussed and studied. In 1997, Baldwin and

other scholars published a paper "Management in the Modular Era" and proposed the definition of



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modularity for the first time, arguing that modularity is a process of decomposing complex things and

turning them into relatively simple units with independent functions and operation capabilities

(Baldwin & Clark, 1997). On this basis, Japanese scholars such as Masahiko Aoki have made a clearer

explanation of modularity. He believes that module is a semi-autonomous subsystem in a large system,

and "subsystem" refers to a more complex system that can be combined with other subsystems in the

system according to certain standard requirements. "Semi-self-discipline" means that the subsystem has

certain room for adjustment and improvement when it adapts to the requirements of the unified

specification. "Modular decomposition" refers to the decomposition of a complex system into multiple

independent subsystems according to certain standard requirements, and "modular centralization" refers

to the combination of independent subsystems into a more complex new system (Aoki & Ando, 2003)

with reference to certain requirements.

Since then, the academic community has officially started the modular systematic research stage. Since

the 1990s, the fruitful development of modularity in various fields has also ushered in a research

climax, and these studies have been successively applied to product development, technological

innovation, organizational behavior and industrial development and other fields, and gradually formed

product modularity, production modularity, management modularity and industrial modularity theories.

However, after reviewing the literature, it is found that most scholars carry out research from the

direction of modularity, a certain industry or service industry, etc., and lack of research on the overall

industrial modularity under the current environment. Based on the research background of modularity

and the significance of The Times, the original intention of this paper is: first, to grasp the evolution

path of modularity production network theory as a whole and understand the latest research and

development trend; The second is to explore the possible research direction in the future, hoping to

provide academic guidance for the later generations.

2. Modular Theory and Its Characteristics

2.1 Modular Theory

In the era of information technology and economic globalization, it is also an era full of uncertainty and

complexity. For this reason, scholars believe that modular design can be used as a solution to the

increasing complexity of products, organizations and industries (Asan, 2008; Schilling, 2001)

At present, the concept of modularity has formed two mainstream schools, one is simon, Baldwin,

Clark and Aoki Masahiko represented by the mainstream modular theory. In most of the literature on

mainstream module theory, modularity refers to the ability of a product to be broken down into multiple

components that can be separated and reassembled while maintaining integrity and functionality with

each other (Baldwin & Clark, 1997). As long as it is connected according to the established setting

standards and interfaces, the innovation of the entire product or system can be realized by changing one

or some of the components, without the need to adjust or modify the other parts of the product.

Therefore, modularity is implemented in a relatively stable interface standard. The other is the modified



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modularity theory represented by Ernst and Chesbrough. Scholars represented by Ernst and

Chesbrough believe that the development of modules requires a broader knowledge reserve, and the

essence of modularity is the exchange of knowledge. Knowledge exchange promotes technological

progress, and it can be said that technological progress will be repeated throughout the whole modular

process. In order to achieve better benefits, modular systems may need to break the original structure,

so there is no relatively stable interface standards. The two theories seem to be opposite, but in fact

they are relatively complementary views (Bai, 2020). The modular decomposition construction needs

to be completed under certain design rules, which is the basis of constant. However, with the Internet,

big data into all walks of life, the whole society is in a stage of rapid development, consumer demand

and product change speed continue to accelerate, product modular design rules may also change. Thus,

change and unchange have always revolved around the evolution and development of modularity.

2.2 Modular Features

Modular design rules include: clearly defined and free design. Clear regulations include structures,

interfaces and standards. The structure determines which modules are the constituent elements of the

system and what role the modules have. Interfaces specify how modules interact, relate to each other,

and exchange information. Standards are used to verify that the design of a module complies with the

rules. Free design is to allow designers to freely play the design within the module under the conditions

of complying with clearly specified conditions (Masahiko, 2003).

Due to the processing method of decomposing a complex system into multiple independent modules,

modularity defined by these methods has the following characteristics:

(1) Independence of functional modules and knowledge modules. According to the standard of modular

design, each decomposed sub-module has the independence of physical form, each sub-module

represents a certain function in the system, and the functions of the modules are independent of each

other and will not coincide. Relative to the design and production of sub-modules, each company has

its own tacit knowledge, manufacturing sub-modules in the black box, and does not need to think too

much about the production and contact problems of other modules. In this context, each company will

strive for excellence in its own module areas, pooling knowledge and resources to improve technology

in proprietary areas. Therefore, in a modular system, the overall performance can be improved through

one or more modular innovations. This not only reduces the cost of innovation, but also improves

innovation efficiency.

(2) Module substitutability and collaborative non-specificity. Each module in the modular system has

different functions, and they are combined into a complete system according to the interface and

standards, and ensure effective operation. Depending on the function, there are both general and special

modules. The general module is the basic function that can ensure the use of the product, and the

special module has a certain specific function. Special modules can not be used alone, need to be

combined with general modules, by increasing and reducing the number of several special modules,

rich module combination and product functions, to meet the customization needs of different users. At



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the same time, the single module transformation in the universal module can also improve the entire

product system, not only to maintain the integrity of the product, but also to achieve low-cost product

technology upgrading. Modular technology facilitates the substitution of product parts and contributes

to the emergence of alternative economy (Masahiko, 2003). The fungibility of modules makes each

module not dedicated and has collaborative non-specificity. This nature changes the relationship

between module function and structure: that is, a function can correspond to a variety of modules, and a

product can also be combined with multiple parts, for example: mobile phones can use 128G memory,

or 256G memory. This nature also changes the relationship between the module function and the

product, that is, a module can also be used for a variety of products, for example: liquid crystal display

can be used for computers, can also be used for mobile phones. The substitutability of modules

broadens the boundaries and life cycles of products, and the collaborative non-specificity of modules

blurs the boundaries of industries. These two characteristics make modularity have unlimited economic

benefits in terms of innovation.

(3) Openness and self-coordination of the modular system. The modules of the system are produced in

accordance with the pre-designed system framework, which not only ensures the independence of each

module, but also ensures the integration and integrity of the system functions. Therefore, as long as the

design and production are carried out in accordance with the design rules, the system can constantly

add new module components. It can be said that modular technology provides an open platform for

product systems. The system can take advantage of this openness by continuously adding or replacing

modules to maintain the vitality of the system. Of course, this openness may bring some negative

problems, for example, the design of some modules themselves is not perfect, and there will be certain

risks in introducing them into the system. Since the modules themselves are independent of each other,

and the design rules of the system will become more and more perfect, so even if some modules

themselves have defects, other modules will achieve good self-coordination under the guidance of the

design rules. The openness of modular system provides the path of knowledge acquisition for

innovation. In the process of innovation and creation, knowledge and information acquisition is very

important.

Speed up product innovation. With modularity, end users can generate additional value by mixing and

matching components to meet different functional requirements. In this way, the modularity of the

system can provide users with a variety of products. Manufacturers can improve the assembly

efficiency and obtain higher benefits through the modular design of products. However, under the

design rules, the modules in the product are independent of each other, and the other modules in the

system will not be changed because of the change of one module (Baldwin & clark, 1997). Therefore,

optimizing the subsystem does not necessarily optimize the overall system performance.

2.3 Function of Modular

(1) Enhance the flexibility of product innovation. Simon (1996) believes that modular architecture

reduces the complexity of products by breaking them into loosely coupled components and connecting



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them with each other through pre-specified interfaces. It also increases the design flexibility for later

product innovation. Flexibility is achieved by replacing components in a single design hierarchy.

Although not all products are decomposable in the real world, the ideal modular architecture provides a

path for one-to-one mapping between product functional elements and physical modules. However,

some scholars believe that modularity does not reduce the complexity of products. Through case

studies of different industries, Stadenmeyer finds that modularity increases the complexity of product

development activities when applied to the product production process. (Staudenmayer et al., 2005)

(2) Diversify investment risks. Reduce research and development costs. Since each module in each

modular product has a certain independence, it is possible to innovate and upgrade the entire product

by innovating on a single module. Masahiko has also pointed out that after modularizing the product,

each module may enable "back-to-back" independent competitive research by one or more teams at the

same time. In this process, the manufacturer shares the risk with multiple suppliers. Modular

production not only reduces the risk of uncertainty, but also improves the success rate of research and

development. This risk dispersion is mainly manifested in two aspects: First, enterprises are in the

common cognition of the standard interface for production innovation, R & D enterprises do not need

to collect all the information of the product, only need to concentrate on improving the performance of

the responsible module. Second, each module's information is a "black box" relative to other modules,

independent and closed. The innovation of the module is to further process and refine the information

in the module, and improve the performance on the basis of the original product, which makes the

product more confident of the market after improving the performance, because the original product

has been recognized by the market.

When the product has the technical separability, the enterprise will modularize the product in order to

pursue economic benefits. At the organizational level, product modularity will certainly bring about

changes in the internal division of labor and organizational structure of enterprises. Such changes have

caused some scholars to analyze the impact of modularity from the perspective of industrial

organization, which will further change the relationship between clusters and production networks.

3. Research Status

3.1 Domestic Research Status

Product modularization development to a certain stage, will form a certain organizational structure, the

formation of industrial modularization; When the enterprises in the industrial cluster are regarded as

independent individuals, these individuals can be combined into a complete system, it is a modular

industrial cluster. When industrial modularization has evolved into a global production network �has

formed a modular production network (Peng, 2009). The development and research of modularity are

mainly carried out from these aspects.

3.1.1 Industrial Modularization

In today's world, the economic situation is severe and complex, and industrial upgrading and



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transformation cannot be separated from the modular creation of products and industries. In the early

stage of industrial development, it is mainly modularization, in the middle stage, it is module

re-integration, and in the late stage, it is the expansion of the application field of modules. Research is

of great significance for leading the scale of the industry and assisting in the adjustment and upgrading

of the industry (Zhang, Qiao, & Song, 2016). Zhang and other scholars believe that only through the

vertical decomposition and horizontal integration of the vertical integration industrial chain through

modularization can industries achieve effective integration in a wider range and eventually form a

complex industrial network with new industrial attributes or new formats (Xiao & Zheng, 2012).

Most scholars put forward targeted suggestions and improvement methods from the perspective of an

industry. From the perspective of the education industry, Li Jun and other scholars compared the

modular reform of vocational education in Britain and Germany and concluded that the reform of

vocational education paradigm should be carried out in accordance with local conditions and step by

step (Li & Yang, 2023). Yu believes that the high-speed rail system is decomposable and integrated, and

it is necessary and feasible in terms of modular design and production (Yu, 2018). Modularity is one of

the important trends of the automobile industry towards the era of new energy vehicles, which makes

the automobile industry gradually evolve from the dominance of integrated product architecture to the

dominance of modular product architecture (Tian, 2015). Therefore, most scholars start their research

from the automobile industry. Taking FAW-Volkswagen as an example, scholar Zhao Ziyu discussed

the impact of modular production on the spatial organization of the automobile industry cluster at the

local - regional scale. He believed that the economies of scale brought by modular production could

overcome the transportation cost to a certain extent, leading to the decrease of the dependence on the

production of the host country and the decrease of the spatial agglomeration of parts suppliers after the

industrial transfer of large vehicle groups. Modular production will reorganize the organizational

structure of regional production network, resulting in a competitive advantage of "beyond local", and

the effect of scale economy, knowledge and technology sharing and enterprise organization

strengthening will jointly drive the spatial organization reconstruction of automobile industry clusters

under modular production (Zhao, Wang, & Chen, 2021). Wang et al. discussed the interaction between

industrial modularity and discontinuous innovation in combination with the automobile industry, and

found that the relationship between them is not only positive, but also significant in the long run (Wang,

Huang, & Lin, 2018).

Integrated circuit chip is the industrial brain, but also China's current urgent need to solve and

overcome the problem, so more scholars will also study the role of modularity on the industry from this

direction. Wang scholars proposed that the chip design and manufacturing mode has developed into a

chipless design mode. China's current chip core research and development field is weak, and it is at a

disadvantage in the "trade war" in the face of the United States. There is an urgent need to use the

chipless design mode, combined with the modular research and development production mode, to form

a large network ecology around the chip design of core enterprises, break through the technical barriers



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of chip research and development, and promote the rapid improvement of China's integrated circuit

chip industry (Wang, 2019). With the in-depth development of economic globalization and information

age, the high-tech industrial chain has shown the characteristics of modularity, and the economic

organization structure has also developed to a modular structure, and has gradually become the leading

industrial organization model. The difference of resources and knowledge capital makes the

heterogeneity of modules prominent in the modular network, and heterogeneity has the effect of

amplifying comparative advantage. The existence of heterogeneity in the modular industrial chain

further amplifies the comparative advantage between China and the United States in the trade of

high-tech products, resulting in the effect of mutual complementarity and joint enhancement of

interests between China and the United States in the trade of communication equipment (Liu & Su,

2019).

Under the background of the division of labor and deconstruction of the industrial value chain, the

production and operation activities of enterprises are no longer limited to their own resources, but

spread to the integration and utilization of the entire network resources. Therefore, Wang and other

scholars proposed four dimensions of enterprise modularity capability, namely vision planning

capability, rule design capability, module integration capability and relationship management capability,

and on this basis proposed a measurement scale of enterprise modularity capability (Wang & Ren,

2021). In addition, there are also scholars from the modular perspective, based on modular production

network industrial chain integration of theoretical research; On this basis, the network industry chain

model of Anhui automobile industry was constructed (He & Zhang, 2013). Under the modular

production mode, the new characteristics of the competitive advantage of enterprises are studied

(Zhang, Tang, & Guo, 2013). Based on the modular theory, a theoretical model of collaborative

innovation in the new energy automobile industry is constructed, thus promoting the improvement of

the overall innovation ability of the industrial chain (Liu, Wu, & Sun, 2012).

In addition, with the technological breakthrough and industrial upgrading of strategic emerging

industries showing significant modular characteristics, strategic emerging industries also participate in

and create modular industrial organizations, join the modular production network, and actively utilize

global high-quality resources to gradually optimize and upgrade the industrial structure (Zhang & Bai,

2018). Among the strategic emerging industries, the new energy industry has the highest degree of

modularity, the new energy automobile and the new generation of information technology industry has

a high degree of modularity, and the biomedical industry and the new material industry has a relatively

low degree of modularity.

3.1.2 Industrial Cluster Modularization

Many scholars believe that modularity is the essence of industrial cluster and the expansion form of

value chain, and put forward the concept of value module. With the development of socialized mass

production, industrial division of labor and specialization are deepening. Scholars at home and abroad

generally believe that the division of labor and specialization help to improve the efficiency of social



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production. At present, industrial cluster has become the "third mode of production organization"

co-existing with market and enterprise, and its formation and development are often based on division

of labor and specialization. The continuous innovation and development of modular production mode

on the basis of industrial division of labor not only breaks through the combination mode of traditional

industrial chain and the production mode of traditional enterprises, but also profoundly changes the

rules and paths of industrial cluster evolution (Yan, 2011). The path of industrial cluster modularization

is the interaction of technology modularization, product modularization, market modularization and

organization modularization. Modular industrial clusters have high organizational efficiency, which is

mainly manifested as: innovation efficiency based on functional modules, coordination efficiency

constrained by design rules, information transmission efficiency characterized by flat organizational

structure, low assimilation efficiency guided by active innovation, transaction efficiency based on

transaction cost reduction, and collaboration efficiency based on division of labor (Wang, 2011).

The modularization of industrial cluster organization can break the regional and industrial restrictions

and form a modular value network with low transaction costs and high innovation ability (Cao, Li, &

He, 2016). As a new mode of production, division of labor and organization, modularity is bound to

have a profound impact on the upgrading of manufacturing clusters. Modularity leads to the

transformation of the division of labor mode, governance mode and market structure of the global value

chain, which brings new opportunities, new momentum and stage crossing in the path of cluster

process upgrading, product upgrading, function upgrading and chain upgrading. This has certain

enlightenment significance for realizing the upgrading and transformation of the manufacturing

industry to "intelligent manufacturing in China" and "high-quality development" (Su, Liu, & Li, 2018).

3.1.3 Modular Production Network

Modular production network generally refers to an open network organization formed by connecting

production and integrated manufacturers with contracts on the premise that products can be

modularized. It is a new form of organization that ADAPTS to modular technology and information

technology. As one of the most advanced forms of industrial organization, modular industrial network

is of great significance in promoting the sharing of superior resources among enterprises, building

innovation platforms and enhancing the competitiveness of enterprises (Zhang & Zhong, 2015). Many

scholars analyze the collaborative innovation ability of industry from the perspective of modular

network based on their own research fields. Liu Guowei and other scholars analyzed the industrial

collaborative innovation ability from the perspective of four dimensions of innovation input, innovation

output, environmental support and policy support, and believed that policy support contributed the

most to collaborative innovation ability, while environmental support contributed the least (Liu, Shao,

& Liu, 2021). Some scholars also believe that modular division of labor has a great impact on

technological innovation, while modular collaboration has a relatively small impact on technological

innovation (Cao, Zhang, & Liu, 2015). Some scholars also believe that industrial modularity and

industrial innovation have a low level of coordinated development and show a fluctuating trend (Wang,



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He, & Wang, 2014).

In the production network, the modular division of labor reduces the inter-organizational dependence,

but does not affect the organizational activities and cooperation between modules. Therefore, in order

to improve the collaborative innovation ability of enterprises, it is necessary to make use of the

intermediary role of modularity to effectively connect the modular technical framework of enterprises,

universities, research institutes and partners, and connect the relationship between the demand side and

the supply side, so as to better enhance the industrial value (Wang, Chen, & Cheng, 2018). To some

extent, the service modularization structure of industrial network will provide a technical platform for

its risk formation path. Therefore, the axiomatization, loose coupling and network interface rule design

of network node modules are optimized (Li, Shen, & Yu, 2019).

Based on the formation of modular production networks, many scholars also follow current events to

understand the development form of emerging modular networks. Ge and other scholars found the

modularization of value network, that is, in the creative industry cluster, creative enterprises cooperate

in the form of different business modules, and carry out modular cooperation with their respective core

capabilities as the link, forming a new enterprise value network system based on modularization.

Through the interaction of the three value-added subsystems of industrial chain, supply chain and value

chain, they form a complex comprehensive system of value network and create value (Ge & Gao,

2017). Ke et al. built an industrial value network division model based on the modular

three-dimensional framework through the Beibu Gulf industry in Guangxi, and discussed the value

enhancement path of industrial value network under the condition of modular division of labor (Ke &

Shi, 205).

By comparing the service modularization value network governance mechanism of cigarette industry

and dairy industry, Yu et al. believed that the difference of environment led to the different forms of the

two industries' modularization dilemma, and proposed the corresponding service modularization value

network governance mechanism (Yu & Shen, 2017). Min Hong proposed a clearer concept of

enterprise modularity based on the analogy of "integration" and "specialization" (Min, 2017). At the

same time of the development of the new modular network, the cross-industry integration of network

modularity has also attracted the attention of researchers. Scholar Dong Hua proposed that the mutual

penetration and reorganization of industrial chain modules of manufacturing and service industries can

not only bring about industrial upgrading effect, cost saving effect, integration and innovation effect

and knowledge spillover effect, but also change the original form of manufacturing industry, resulting

in the emergence of a new cooperation network of capabilities and demands - service-oriented

manufacturing network. It is further decomposed into service production value module, productive

service value module, customer utility value module, and the functions of each value module (Dong,

2016).



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3.2 Foreign Research Status

Foreign scholars have studied that modularity is the innovation driving force of industrial clusters and

is conducive to eliminating the endogenous risks of industrial clusters (Ma, 2008). Modularity is a

design attribute of product, organization, and inter-company network architecture; Modularity is a

process that influences these designs while also shaping company boundaries and industry landscape;

"Modularity" is a cognitive framework that guides the classification and interpretation of various

economic phenomena, so modularity refers to attributes, processes and frameworks (Macduffie, 2013).

Increasing efficiency and productivity are contemporary challenges facing industrial organizations, and

product modularization is considered a strategic alternative to achieving these goals, capable of

improving company domain or production efficiency (Piran, 2016). In addition, product modularity can

also enhance an enterprise's competitive advantage (Kim & Shin, 2021). Different scholars have

proposed the role of modularity from different industries. Some scholars, starting from the construction

industry, have proposed a unified definition and practical guidelines for modules in construction

projects to help managers organize project activities to achieve effective modularity (Gosling, 2016).

From the perspective of urban transportation, based on the modular framework of service system,

service modules and data sources can be determined to promote co-creation and innovation within the

existing service system (Schreieck, Wiesche, & Krcmar, 2016). Similarly, foreign scholars also prefer

to study the modularity of the automobile industry, and believe that modularity is an important factor in

China's automobile industry. It has a positive effect on these variables that constitute firm relative

positional advantage (ICao, Liu, Zhang, & Zhang, 2013). Moreover, through the sample analysis of 262

auto parts suppliers in China, the positive impact of modularity on enterprise performance is

demonstrated again (Seyoum & Lian, 2018). Foreign scholars pay more attention to the role of

modularity on performance, and believe that product modularity is the intermediary between

customization demand and financial performance, which can promote enterprises to develop

customized products (Persson & Lantz, 2022). Global modular production networks will also be

studied from the information technology industry and manufacturing sector (Cao, Zhang, & Liu, 2012).

Domestic and foreign scholars have contributed a lot of excellent literature materials to the study of

modularity, and also consider and analyze the economic utility of modularity for industrial upgrading

from the perspective of different industries, especially the automobile industry. Domestic scholars have

a high degree of research focus and will generate a lot of literature on a single focus, while foreign

scholars seem to consider more personal preferences in their research, which has a certain relationship

with the domestic and foreign research environment. Domestic studies on modularity pay more

attention to the impact of modularity on the value chain of the entire industry, and use cases of specific

companies or industries to study the value governance of modularity, while foreign studies pay more

attention to the role of performance.



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4. Brief Comments

Modular production network is different from the general network organization, it is with the maturity

of modular technology and the development of information technology and gradually grow up and is

not limited by the region, and has a close relationship with the decomposition and integration of

complex products or complex technologies. Scholars at home and abroad have fully studied the

modular production network from different perspectives, which is of great significance for reference.

However, there are some fields that can be further enriched:

(1) Lack of large sample data, and cannot conduct empirical research with both static and dynamic data.

Most of the existing literatures use cross-section data, that is, relatively static data, which cannot

reasonably observe the changes between variables of the research object under the role of modularity,

and the conclusions drawn will be relatively incomplete.

(2) The research scenario is too narrow, and there is a lack of articles to prove whether modularity

brings positive and extensive effects in a general sense. Most of the articles choose high-tech

manufacturing industries such as automobiles, IT information, and automation, ignoring the application

scenarios and applicability of modularity in other medium and low-degree technology manufacturing

industries or service industries, and failing to obtain a comprehensive mechanism and impact

relationship of modularity.

(3) Lack of combination of modular research and social environment. With the iteration and new of

artificial intelligence and AI technology, network technology will continue to penetrate into the

low-end labor environment offline, and the current youth unemployment rate has reached 20%. Under

such a background, how to improve the rationality of product modular design and ensure social

stability is also a topic worthy of discussion.

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