Carliss Y. Baldwin

Carliss Y. Baldwin

William L. White Professor of Business Administration, Emerita

William L. White Professor of Business Administration, Emerita

+1 (617) 495-6673
 
Carliss Y. Baldwin
Contact Information
(617) 495-6673
Featured Work Publications Research Summary Awards & Honors
Distributed Innovation in Open Systems—The Role of Modularity
Distributed innovation in open systems is an important trend in the modern global economy. As education levels rise and communication costs fall, more people have the means and motivation to innovate. Supply chains now stretch around the world as firms outsource production to innovative suppliers, and many firms have structured their products as open systems in which users and complementors are invited to innovate.

In general, distributed innovation in open systems is made possible by the modularity of the underlying product or process. Modularity reduces the risk that small changes in the environment will cause the whole system to fail, and makes it easier for the entire system to evolve towards higher levels of performance. This is true for complex products and processes and for networks of firms loosely linked in so-called business ecosystems.

My research is aimed at understanding how modularity is achieved in technical systems as well as the impact of modularity on firm value and industry structure. Currently I am working on projects focused on (1) impact of modularity on intellectual property, (2) the hidden structure of complex systems (especially software), and (3) how design rights may be shared across modular boundaries.

Carliss Y. Baldwin is the William L. White Professor of Business Administration at the Harvard Business School. She studies the process of design and its impact of design architecture on firm strategy, platforms, and business ecosystems. With Kim Clark, she authored Design Rules, Volume 1: The Power of Modularity. Her work has been published in a variety of leading journals including Strategic Management Journal, Organization Science, Management Science, Research Policy and Harvard Business Review. She has won numerous awards for research: most recently, she received a Doctor honoris causa from the Technical University Munich in 2014, and in 2015 was named the Distinguished Scholar of the Technology and Innovation Management (TIM) division of the Academy of Management.

Carliss has a Doctorate and MBA from Harvard Business School, and an SB in Economics from MIT. She studied finance under Robert C. Merton, Franco Modigliani, and John Lintner.

At Harvard Business School, she developed and taught Mergers & Acquisitions, a second-year elective MBA course, and presently teaches Finance 2, a first-year required course. She has written over 50 cases and notes for MBA and executive classes. In 2014, her case on Roche’s Acquisition of Genentech was named the best case in Finance, Accounting and Control by the Case Centre.

Also at Harvard Business School, she has been a Director of Research, Senior Associate Dean for Faculty Planning, and head of the Doctoral Programs at Harvard Business School. Within Harvard University, she has been on the Visiting Committee of the Harvard Graduate School of Design and Chair of the Advisory Committee on Social Responsibility. She has served on numerous corporate and non-profit boards.

Featured Work
Design Rules, Vol. 1: The Power of Modularity
with Kim B. Clark
We live in a dynamic economic and commercial world, surrounded by objects of remarkable complexity and power. In many industries, changes in products and technologies have brought with them new kinds of firms and forms of organization. We are discovering news ways of structuring work, of bringing buyers and sellers together, and of creating and using market information. Although our fast-moving economy often seems to be outside of our influence or control, human beings create the things that create the market forces. Devices, software programs, production processes, contracts, firms, and market are all the fruit of purposeful action: they are designed.

Using the computer industry as an example, Carliss Y. Baldwin and Kim B. Clark develop a powerful theory of design and industrial evolution. They argue that the industry has experienced previously unimaginable levels of innovation and growth because it embraced the concept of modularity, building complex products from smaller subsystems that can be designed independently yet function together as a whole. Modularity freed designers to experiment with different approaches, as long as they obeyed the established design rules. Drawing upon the literatures of industrial organization, real options, and computer architecture, the authors provide insight into the forces of change that drive today's economy.
Hidden Structure: Using Network Methods to Map System Architecture
with Alan MacCormack and John Rusnak

All complex systems can be described in terms of their architecture, that is, as a nested hierarchy of subsystems. In this paper, we use network methods to detect the core components of an architecture, to establish whether systems possess a core-periphery structure, and to measure important elements of these structures. Our results complement the wealth of theoretical papers published on system design and architecture. Using a sample of 1286 releases from 17 different software applications, we establish some stylized facts about the structure of real-world software systems. We find that the majority of systems in our sample – 67% to 89% – possess a core-periphery structure. However, it is important to note that a significant number of systems lack such a structure. Thus a considerable amount of managerial discretion exists when choosing the “best” architecture for a system. The contribution of this paper is to make hidden features of a system’s architecture visible. Our methods may be helpful in locating and measuring technical debt, that is, the cost of making and verifying future changes in a complex technical system.

Modularity and Intellectual Property Protection
with Joachim Henkel
Modularity is a means of partitioning technical knowledge about a product or process. When state-sanctioned intellectual property (IP) rights are ineffective or costly to enforce, modularity can be used to hide information and thus protect IP. We investigate the impact of modularity on IP protection by formally modeling the threat of expropriation by agents. The principal has three options to address this threat: trust, licensing, and paying agents to stay loyal. We show how the principal can influence the value of these options by modularizing the system and by hiring clans of agents, thus exploiting relationships among them. Extensions address screening and signaling in hiring, the effects of an imperfect legal system, and social norms of fairness. We illustrate our arguments with examples from practice.
Books
  • Baldwin, Carliss Y., and Kim B. Clark. Design Rules, Volume 1, The Power of Modularity. Cambridge, MA: MIT Press, 2000. View Details
  • Baldwin, Carliss Y., and Kim B. Clark. Design Rules, Volume 1, The Power of Modularity. Tokyo, Japan: Research Institute of Economy, Trade and Industry (RIETI), 2004, Japanese ed. View Details
  • Baldwin, Carliss Y., and Kim B. Clark. Design Rules, Volume 1, The Power of Modularity. Cambridge, MA: MIT Press, 2006, Chinese Mandarin ed. View Details
Journal Articles
Book Chapters
Working Papers
Cases and Teaching Materials
Presentations
  • Baldwin, Carliss Y. "Deciding What to Leave Out: Pragmatic Philosophy in Design Theory." Paper presented at the 7th International Workshop on Design Theory, Design Society. Design Theory Special Interest Group, Paris, France, January 27–28, 2014. View Details
  • Baldwin, Carliss Y. "The Principles Behind Open Source Business Models." Paper presented at the Innovation Lab, MIT Sloan School of Management, Cambridge, MA, November 5, 2013. View Details
  • Baldwin, Carliss Y. "Architectural Strategy and Design Evolution in Business Ecosystems: Discussion." Academy of Management Annual Meeting, August 10, 2013. View Details
  • Baldwin, Carliss Y. "The Impact of Modularity on Intellectual Property and Value Appropriation." Lecture at the Trento Summer School, Cognitive and Experimental Economics Laboratory (CEEL) and Università degli studi di Trento, Trento, Italy, July 8, 2013. View Details
  • Baldwin, Carliss Y. "Modularity and Open and User Innovation." Lecture at the Trento Summer School, Cognitive and Experimental Economics Laboratory (CEEL) and Università degli studi di Trento, Trento, Italy, July 8, 2013. View Details
  • Baldwin, Carliss Y. "Mirroring and Anti-Mirroring: Creating a Design Commons." Lecture at the Trento Summer School, Cognitive and Experimental Economics Laboratory (CEEL) and Università degli studi di Trento, Trento, Italy, July 4, 2013. View Details
  • Baldwin, Carliss Y. "Thin Crossing Points, Mundane Transaction Costs, and the Boundaries of Firms." Lecture at the Trento Summer School, Cognitive and Experimental Economics Laboratory (CEEL) and Università degli studi di Trento, Trento, Italy, July 4, 2013. View Details
  • Baldwin, Carliss Y. "Design Options and Positive Risk." Lecture at the Trento Summer School, Cognitive and Experimental Economics Laboratory (CEEL) and Università degli studi di Trento, Trento, Italy, July 3, 2013. View Details
  • Baldwin, Carliss Y. "Positive Risk and the Innovation Commons." Paper presented at the Vienna Conference on Strategy, Organizational Design, and Innovation, Universität Wien. Institut für Betriebswirtschaftslehre, Vienna, Austria, June 22–23, 2013. View Details
  • Baldwin, Carliss Y. "Hidden Structure: Using Network Methods to Map System Architecture." Paper presented at the CRIOS Conference, Università Bocconi, Center for Research on Innovation, Organization and Strategy (CRIOS), Milan, Italy, June 19, 2013. View Details
  • Baldwin, Carliss Y. "Design as a Commons: Lessons from Teacher's Participation in the Design of New Schools." Paper presented at the Bocconi Study Days, Università Bocconi, Milan, Italy, June 17–18, 2013. View Details
  • Baldwin, Carliss Y. "Positive Risk and the Innovation Commons." Intersect, an Innovation Symposium, Harvard Business School Club of Wisconsin, Milwaukee, WI, March 7, 2013. View Details
  • Baldwin, Carliss Y. "Modularize—Allocate—Protect: How Firms Profit from Open Modular Systems." Lecture at the Digital Economy Seminar, MIT Center for Digital Business, Cambridge, MA, October 2012. View Details
  • Baldwin, Carliss Y. "Modularize—Allocate—Protect: How Firms Profit from Open Modular Systems." 13th International CINet Conference, CINet, Rome, Italy, September 2012. View Details
  • Baldwin, Carliss Y. "Strategy in Business Ecosystems: Next Steps." Lecture at the Academy of Management Annual Meeting, Boston, MA, August 2012. View Details
  • Baldwin, Carliss Y. "Modularity and Distributed Innovation: Opportunities and Threats." Lecture at the Academy of Management Annual Meeting, Boston, MA, August 2012. View Details
  • Baldwin, Carliss Y. "Investigating Architectures and Knowledge." Academy of Management Annual Meeting, Boston, MA, August 2012. View Details
  • Baldwin, Carliss Y. "Organizational Design in Business Ecosystems." Paper presented at the Inaugural Organizational Design Community Conference, Boston, MA, August 2012. View Details
  • Baldwin, Carliss Y. "The Angel's Bargain: Complementary Strategies in Business Ecosystems." 10th International Open and User Innovation Workshop, Boston, MA, July 30–August 1, 2012. View Details
  • Baldwin, Carliss Y. "Managing Intellectual Property in Business Ecosystems." 10th International Open and User Innovation Workshop, Cambridge, MA, July 30–August 1, 2012. View Details
  • Baldwin, Carliss Y. "Legal Challenges of Distributed Innovation." Lecture at the Association of American Law Schools Midyear Meeting, Association of American Law Schools, Berkeley, CA, June 8–12, 2012. View Details
  • Baldwin, Carliss Y. "Patents and Modularity." Paper presented at the 2nd PatCon, Boston, MA, May 11–12, 2012. View Details
  • Baldwin, Carliss Y. "The Impact of Modularity on Intellectual Property and Value Appropriation." MIT Organizational Economics Lunch, Massachusetts Institute of Technology (MIT), Cambridge, MA, March 2012. View Details
  • Baldwin, Carliss Y. "Impact of Modularity on Intellectual Property and Value Appropriation." Paper presented at the Strategy Seminar, University of North Carolina at Chapel Hill, Kenan-Flagler Business School, November 18, 2011. View Details
  • Baldwin, Carliss Y. "Concurrent Sourcing and Selling." Strategic Management Society Annual International Conference, Miami, FL, November 6, 2011. View Details
  • Baldwin, Carliss Y. "IP Strategies in Open Systems." Strategic Management Society Annual International Conference, Miami, FL, November 6, 2011. View Details
  • Baldwin, Carliss Y. "Impact of Modularity on Intellectual Property and Value Appropriation." Paper presented at the Strategy Seminar, Tuck School of Business, Hanover, NH, September 23, 2011. View Details
  • Baldwin, Carliss Y. "Business Ecosystems and Open and User Innovation." Open and User Innovation Workshop, Vienna, Austria, 2011. View Details
  • Baldwin, Carliss Y. "A Test of the Mirroring Hypothesis." Paper presented at the Industry Studies Association Annual Conference, June 2011. View Details
  • Baldwin, Carliss Y., and Alan MacCormack. "Finding Technical Debt in Platform and Network Architectures." MathWorks, April 6, 2011. View Details
  • Baldwin, Carliss Y. "Bottleneck Strategies for Business Ecosystems." Paper presented at the MIT Sloan School of Management, Technological Innovation, Entrepreneurship, and Strategic Management (TIES) Seminar, January 2011. View Details
  • Baldwin, Carliss Y. "Open Standards and Their Enemies." Wharton School, December 1, 2010. View Details
  • Baldwin, Carliss Y. "Finding Potential Bottlenecks You Can Build a Platform Upon." Paper presented at the Open and User Innovation Workshop, November 01, 2010. View Details
  • Baldwin, Carliss Y. "The (Necessary) Virtue of Openness." Paper presented at the Strategy and International Management Group, London Business School, October 01, 2010. View Details
  • Baldwin, Carliss Y. "Using Architecture to Capture Value: The Case of Software." University of Edinburgh, September 1, 2010. View Details
  • Baldwin, Carliss Y. "Designs as Selfish Genes: Modularity, Options and Industry Structure." University of Lancaster, September 1, 2010. View Details
  • Baldwin, Carliss Y. "Hidden Structure: Core-Periphery and Other Architectures." Thomas J. Watson IBM Research Center, August 1, 2010. View Details
  • Baldwin, Carliss Y. "Explaining the Financial Meltdown - Discussion." Paper presented at the Academy of Management Annual Meeting, Montreal, August 01, 2010. View Details
  • Baldwin, Carliss Y. "Real Options and Modularity." Paper presented at the Academy of Management Annual Meeting, Montreal, August 01, 2010. View Details
  • Baldwin, Carliss Y. "Modularity, Options and Design Evolution." Harvard Medical School, Department of Systems Biology, June 1, 2010. View Details
  • Baldwin, Carliss Y. "The Architecture of Complex Systems: Modularity, Options and Strategy." Siemens Corporation, Princeton, NJ, June 1, 2010. View Details
  • Baldwin, Carliss Y. "The Strategic Use of Architectural Knowledge by Entrepreneurial Firms." Paper presented at the DRUID Summer Conference, London, June 01, 2010. View Details
  • Baldwin, Carliss Y. "Modeling a Paradigm Shift: From Producer Innovation to User and Open Innovation." Paper presented at the DRUID Summer Conference, London, June 01, 2010. View Details
  • Baldwin, Carliss Y. "Modeling a Paradigm Shift: From Producer Innovation to User and Open Innovation." Paper presented at the User and Open Innovation: How Should Intellectual Property Law Respond?, St. Helena, CA, May 01, 2010. View Details
  • Baldwin, Carliss Y. "The Strategic Use of Architectural Knowledge by Entrepreneurial Firms." Paper presented at the Wharton Technology Conference, Philadelphia, PA, April 01, 2010. View Details
  • Baldwin, Carliss Y. "The Fragile Core of the Financial System." Paper presented at the Strategic Management Society Annual International Conference, October 01, 2009. View Details
  • Baldwin, Carliss Y., and Eric von Hippel. "Modeling a Paradigm Shift: From Producer Innovation to User and Open Innovation." Paper presented at the MIT-Harvard Economic Sociology Seminar, September 01, 2009. View Details
  • Baldwin, Carliss Y. "Appropriating Value in Modular Systems." Linköping University, Sweden, September 1, 2009. View Details
  • Baldwin, Carliss Y. "Modularity for Value Appropriation - Drawing the Boundaries of Intellectual Property." Paper presented at the Academy of Management Annual Meeting, Chicago, August 01, 2009. View Details
  • Baldwin, Carliss Y. "Modularity for Value Appropriation - Drawing the Boundaries of Intellectual Property." Università del Salento, Italy, July 1, 2009. View Details
  • Baldwin, Carliss Y. "The Evolvability of Designs." Paper presented at the MIT Workshop of Network Architecture, June 01, 2009. View Details
  • Baldwin, Carliss Y. "Exploring Core-Periphery Structures in Complex Software Products." Drexel University, Philadelphia, PA, May 1, 2009. View Details
  • Baldwin, Carliss Y. "Where Do Transactions Come From? Modularity, Transactions and the Boundaries of Firms." Vanderbilt University School of Law, Nashville, TN, February 1, 2009. View Details
  • Baldwin, Carliss Y. "A Design-Centric View of the Economy (and the Financial Crisis)." Paper presented at the International Symposium on the Foundations of Software Engineering, November 11, 2008. View Details
  • Baldwin, Carliss Y. "A Design-Centric View of the Economy (and the Financial Crisis)." Paper presented at the Collaborative Innovation and Design Capabilities International Workshop, October 31, 2008. View Details
  • Baldwin, Carliss Y. "A Design-Centric View of the Economy (and the Financial Crisis)." Paper presented at the INFORMS Annual Meeting, Washington, DC, October 12–15, 2008. View Details
  • Baldwin, Carliss Y. "Where Will Open Development Communities Prevail?" Paper presented at the HBS-MIT User and Open Innovation Workshop, Boston, MA, August 08, 2008. View Details
  • Baldwin, Carliss Y. "A Design-Centric View of the Economy." Paper presented at the International Schumpeter Society Conference, July 02, 2008. View Details
  • Baldwin, Carliss Y. "Self-Organization in Open Source Development: Discussion." DRUID-DIME Academy Winter Conference, Copenhagen, Denmark, June 17, 2008. View Details
  • Baldwin, Carliss Y. "Economics of Collaborative User Innovation." Paper presented at the Conference on Open and Proprietary Innovation Regimes, June 17, 2008. View Details
  • Baldwin, Carliss Y. "The Architecture of Platforms." Paper presented at the Platforms, Markets and Innovation Conference, London, UK, June 02, 2008. View Details
  • Baldwin, Carliss Y. "A Design-Centric View of the Economy." Paper presented at the Innovation Exchange Conference, May 09, 2008. View Details
  • Baldwin, Carliss Y. "John Virgil Lintner." Paper presented at the HBS Centennial History Colloquium, Boston, MA, April 17, 2008. View Details
  • Baldwin, Carliss Y. "Architectural Strategy and Open/Distributed Innovation." Paper presented at the DRUID/Scansor Conference on Distributed Innovation, Stanford, CA, March 27, 2008. View Details
  • Baldwin, Carliss Y. "Where Do Transactions Come From? Modularity, Transactions and the Boundaries of Firms." Paper presented at the MIT/Sloan Seminar in Organizational Economics, Cambridge, MA, February 14, 2008. View Details
  • Baldwin, Carliss Y. "Design Theory and Methods." Paper presented at the Miniconference with École Nationale Supérieure des Mines de Paris, Boston, MA, October 16, 2007. View Details
  • Baldwin, Carliss Y. "Modularity, Transactions, and the Boundaries of Firms: A Synthesis." Paper presented at the Ross School of Business Strategy Seminar, University of Michigan, Ann Arbor, MI, September 07, 2007. View Details
  • Baldwin, Carliss Y. "Where Do Transactions Come From? Modularity, Transactions and the Boundaries of Firms." Paper presented at the Ross School of Business Strategy Seminar, University of Michigan, Ann Arbor, MI, September 07, 2007. View Details
  • Baldwin, Carliss Y., Michael Jacobides, and Reza Dizaji. "From the Structure of the Value Chain to the Strategic Dynamics of Industry Sectors." Paper presented at the Academy of Management Annual Meeting, Philadelphia, PA, August 07, 2007. View Details
  • Baldwin, Carliss Y. "Frameworks for Thinking about Modularity, Industry Architecture, and Evolution." Paper presented at the Sloan Industry Studies Annual Conference, Cambridge, MA, April 27, 2007. View Details
  • Baldwin, Carliss Y. "Architecture, Innovation and Industry Structure." Paper presented at the Washington University Strategy Seminar, St. Louis, MO, April 9, 2007. View Details
  • Baldwin, Carliss Y. "Steps toward a Science of Design." National Science Foundation Conference on the Science of Design, Alexandria, VA, March 1–2, 2007. View Details
  • Baldwin, Carliss Y. "Making Money from Design Architecture." Lecture at the Product Design and Development, Massachusetts Institute of Technology (MIT), Engineering Systems Division, Cambridge, MA, January 27, 2007. View Details
  • Baldwin, Carliss Y., and Eric von Hippel. "How User Innovations become Commercial Products." Paper presented at the HBS Technology and Operations Management Seminar, Boston, MA, January 11, 2007. View Details
Research Summary
Distributed Innovation in Open Systems—The Role of Modularity
Distributed innovation in open systems is an important trend in the modern global economy. As education levels rise and communication costs fall, more people have the means and motivation to innovate. Supply chains now stretch around the world as firms outsource production to innovative suppliers, and many firms have structured their products as open systems in which users and complementors are invited to innovate.

In general, distributed innovation in open systems is made possible by the modularity of the underlying product or process. Modularity reduces the risk that small changes in the environment will cause the whole system to fail, and makes it easier for the entire system to evolve towards higher levels of performance. This is true for complex products and processes and for networks of firms loosely linked in so-called business ecosystems.

My research is aimed at understanding how modularity is achieved in technical systems as well as the impact of modularity on firm value and industry structure. Currently I am working on projects focused on (1) impact of modularity on intellectual property, (2) the hidden structure of complex systems (especially software), and (3) how design rights may be shared across modular boundaries.
Awards & Honors
Winner of the 2015 Case Centre Award in the Finance, Accounting and Control category for “Roche’s Acquisition of Genentech” with Bo Becker and Vincent Dessain (HBS Case 210-040).
Awarded an Honorary Doctorate from the Technische Universität München (TUM) in 2014.
Winner of the 2015 Distinguished Scholar Award from the Technology and Innovation Management Division of the Academy of Management.
In 2012, "Where Do Transactions Come From? Modularity, Transactions, and the Boundaries of Firms" (2008) was selected as one of the Best Twenty Articles from First Twenty Years of Publication, Industrial and Corporate Change, 1992-2011.
Received the 2008 Distinguished Speaker Award from the Technology Management Section of INFORMS.
Winner of the 2007 University of Vienna Best Paper Award for "How User Innovations Become Commercial Products: A Theoretical Investigation and a Case Study" with Christoph Hienerth and Eric von Hippel (Research Policy, 2006).
Winner of the Newcomen-Harvard Award for Best Paper Published in the Business History Review in 1994 for "Capital Budgeting Systems and Capabilities Investments in U.S. Companies after World War II" (with Kim B. Clark, spring 1994).
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