Benefits of Bounded Diversity: Organizational Learning and Knowledge Transfer in a Multi-Product Manufacturing Environment

Organizational learning and knowledge transfer are key elements within any firm when considering the firm’s competitive advantage and long-term goals. Yet, the roles of learning and knowledge transfer in a multi-product production setting are not well understood. Production and operations management literature suggests production of a variety of products is largely harmful, yet the organizational learning literature suggests there may be benefits to heterogeneity.

This work explores the significance of a multi-product environment on organizational learning and knowledge transfer by studying a US-owned overseas manufacturing facility that is a leading producer of high technology hardware components. The firm produces 5 generations of high-volume focus products as well as a collection of non-focus products [an assortment of small volume products related to the focus products].

We draw on 10 years of firm archival data and qualitative data collected to shed insights into how different levels of product mix (5 generations of a focus product, thousands of minor variations on products to meet customer specifications, and an assortment of small volume products related to the focus product) impact organizational learning differently and why knowledge transfers across some products and not others by examining the role that processes play in these product transitions.

Our results reconcile differences between the organizational learning and production and operations management literatures by finding support for both advantages and disadvantages to product mix on the production line depending on the extent of product differences. We find that short-term productivity improves with bounded diversity – specifically, when multiple generations of the same product are produced in the same facility. This positive impact on productivity of having multiple generations of the same product on the line may in part be explained by the firm’s ability to successfully transfer knowledge from older to newer generations of the product, improving long-term productivity, though we find benefits for focus product heterogeneity over and above the benefits from knowledge transfer. In contrast, we find short-term productivity is decreased when the production line is faced with variety across products that are too different from each other (e.g. different form factors) and across minor product variations (i.e. customer-specific product variations).