Architectural innovation, functional emergence diversification in engineering systems

Abstract

The evolution of the architecture of long-lived complex socio-technical systems have important consequences and can happen in unexpected ways. This dissertation explores this question through the study of the architectural evolution of Municipal Electric Utilities (MEUs) and their diversification into broadband services in the United States. Our research seeks answers to questions of process (why and how did this happen?), impact (what was the economic effect of this evolution?), theory (what is the phenomenon that explains this evolution?) and method (how can we study such changes?). The number of MEUs offering broadband services increased by more than 200% between 2000 and 2005, which made MEUs one of the most important providers of fiber-based broadband services in the nation. As a result, the entry of MEUs into broadband became a heavily debated policy issue at local, state, and national levels, and many laws were proposed for restricting or broadening their role in broadband. Our research provides the first evidence about the economic impact of this phenomenon for better-informed policy making. The analysis of the architectural evolution of MEUs required appropriate methods.

(cont.) We integrated the Representation Stage of the Complex Large Interconnected Open Socio-Technical (CLIOS) Process and Object Process Methodology (OPM) under a framework for system architecture analysis, and developed the CLIOS-OPM Integrated Representation Method (COIReM). COIReM' objective is to study the architectural evolution of socio-technical systems. We applied it to the evolution of MEUs using data from case study research, documentation, field research and interviews. We find that the evolution of MEUs and their entry into broadband services resulted from a process we define as Functional Emergence (FE): the process by which a new externally delivered function emerges triggered by the combined effect of technical and contextual changes affecting internal functions of a complex socio-technical system. The diversification of MEUs into broadband shows that small technological changes related to the internal functions of the system in the presence of regulatory and organizational adaptation, can stimulate the emergence of new externally delivered functions. Especially in organizations with high absorptive capacity and dynamic capabilities, these new functions can become sources of strategic diversification. The inability to understand these dynamics can create dramatic competitive disadvantages.

(cont.) For example, in this case technical changes created significant resources that, while not being perceived as valuable by the system itself, were greatly valued and demanded by an active local customer base. The impact of this evolution was studied quantitatively using Matched Sample Estimators. Results showed that: (i) the adoption of IP-enabled services had a positive impact on the internal efficiency of MEUs, (ii) there is no evidence to support the contention advanced in some policy discussions that MEUs are subsidizing their broadband business with funds from their electric power operations, and (iii) MEUbased broadband is associated with higher growth rates in the number of local business establishments, even after adjusting for the presence of private broadband providers. These qualitative and quantitative results have important implications for policy making. We argue that the entry of MEU into broadband owes more to their nature as an electric utility than as a municipal agency. We suggest that, as result of the economies of scope between electric power and broadband services, MEUs represent a case of sustainable broadband facilities-based providers and that, given the effects in internal efficiency and local economic development, they should be exempted from state legislation preventing local governments from offering telecommunication services.

(cont.) This research makes four main contributions. First, it uncovers a new behavior of complex technological systems: small technological and contextual changes affecting internal components and functions can produce the emergence of new external functions. Second, we propose a new framework to study the architectural evolution of socio-technical systems. Third, it provided evidence that, in the case of MEUs, this behavior is observable and measurable. Finally, the thesis provides a framework with which to formulate intervening policy measures.