Budgeting fixed costs for module development: An empirical study in automotive
Modularity has been extensively discussed as a strategy to provide product variety at limited internal complexity. Its effectiveness ultimately depends on the ability to balance between over-functionality and increasing variant diversity. However, the role of decentralized decision-making in that trade-off has been widely neglected. Equally scant is literature on methods to determine fixed cost objectives in new product development (NPD). In a single case study in automotive, we empirically test the use of budgeting to control decentralized decisions in organizations offering modular products. For this purpose, we conceive a method for budgeting fixed costs for module development. It aims at indicating financial feasibility of concepts and fostering budget adherence. The method is accepted to provide strategic guidance on functionality and variety in early phases of NPD. Still, its participative part is received reluctantly. From this experience, we suggest power distance and personal attitude as variables moderating the acceptance of participative budgeting.