How the innate physical properties of different technologies influence the strategy and structure of the organizations implementing the technologies, the sequel to Design Rules: The Power of Modularity. In Design Rules , volume 2, Carliss Baldwin offers a comprehensive view of the digital economy by putting forth an original theory that explains how technology shapes organizations in a market economy. The theory claims that complementarities arising from the physical nature of technologies can be arrayed on a spectrum ranging from strong to very weak. Two basic types of technologies in turn exhibit different degrees of complementarity between their internal components. Flow production technologies, which are found in steel mills and auto factories, specify a series of steps, each of which is essential to the final product. In contrast, platform technologies, which are characteristic of computer hardware, software, and networks, are modular systems designed to provide options. Baldwin then investigates the dynamics of strategy for firms in platform ecosystems. Such firms create value by solving technical bottlenecks—technical barriers to performance that arise in different parts of the system as it evolves. They capture value by controlling and defending strategic bottlenecks—components that are (1) essential to the functioning of some part of the system; (2) unique; and (3) controlled by a profit-seeking enterprise. Strategic bottlenecks can be acquired by solving technical bottlenecks. They can be destroyed via tactics such as substitution, reverse engineering, bypassing the bottleneck, and enveloping a smaller bottleneck within a larger one. Strategy in platform ecosystems can thus be viewed as the effective management of technical and strategic bottlenecks within a modular technical system. “Carliss Baldwin is a highly original innovation scholar. Her seminal ideas have long helped both researchers and practitioners understand modern innovation processes much more deeply. True to form, in this new book Baldwin contrasts traditional ‘flow’ production technologies with modern platform ecosystems in a way that offers major new insights for us all.” —Eric von Hippel, T. Wilson Professor of Innovation Management, MIT Sloan School of Management   “Baldwin weaves elegant theory, rich historical cases, and astute technical understanding into a tapestry of deep insight into the effect of technology on the structure and evolution of organizations. It is a beautiful, landmark book.” —Kim B. Clark, NAC Distinguished Professor of Management, BYU Marriott School of Business; coauthor of Design Rules , volume 1   “This book is a very ambitious, and indeed very successful, attempt to link the analyses of the patterns of innovation, the organizational forms in modern economies, and the distribution of value along the production chains, illuminating the impact of major technological discontinuities upon the boundaries of the firms and upon value appropriation.” —Giovanni Dosi, Professor Emeritus of Economics, Sant'Anna School of Advanced Studies; author of 2023 Schumpeter Prize winner The Foundation of Complex Evolving Economies “In this astounding book, Dr. Carliss Baldwin explores fundamental questions: Why are corporate organizational structures shaped the way they are? Why have the corporate organizational structures changed so dramatically over the last many centuries? The book makes the provocative claim that changes in organizational structures, and even the markets they operate in, are triggered by technology changes.” —Gene Kim, Wall Street Journal bestselling author of The Phoenix Project , The DevOps Handbook , and Wiring the Winning Organization Carliss Y. Baldwin is William L. White Professor of Business Administration, Emerita at Harvard Business School. With Kim Clark, she authored Design Rules, Volume 1: The Power of Modularity (MIT Press).