Technological competencies and product's evolutionary dynamics - A case study from the aero-engine industry

This paper argues that the management of product-systems calls for a new logic for vertical integration, outsourcing, and R&D strategies. The particular characteristics of product-systems, in fact, requires a thorough understanding of the core, linkage, and peripheral underlying technologies, suggesting, therefore, that simple notions of core competencies that recommend the outsourcing of production, and even worse the development, of component and/or subsystem technologies should be rejected, as they may damage the firm's ability to master the product's evolutionary dynamics. The empirical evidence shows that Rolls-Royce can be considered as an illustrative example of the above arguments. Indeed, Rolls-Royce is vertically integrated as regards the jet engine's inner core, holds a full design capability over its outer core, and as regards the remaining components it retains a system integration capability.