Component Sharing Across Product Categories Leads to Functional Diversification: Evidence from the Japanese Digital Audio-Visual Products Market

This study focuses on component sharing across product categories, in contrast to earlier studies which examined component sharing within a specific category. Cross-category component sharing creates the potential for diversified product functionality by transferring new knowledge between categories, in addition to streamlining development, as previously noted. We collected evidence for this proposal from the Japanese digital audio-visual products market in the late 2000s. Panasonic not only shared software modules and the design of large scale integration (LSI) among products in the same category, but also shared them among televisions and DVD recorders. Its competitors, Sony and Sharp, used shared software and the design of LSI only within a product category. Panasonic products were functionally more advanced than those of Sony and Sharp. This study revealed two types of functionality diversification – simple functional diversification and linked operations.