Two Faces of Decomposability in Search:
Evidence from the Recorded Music Industry 1995-2015
We propose that decomposability may generate a trade-off across different stages of search. We compare (1) decomposed search, the process of searching by producing a decomposed module, and (2) integrated search, the process of searching by producing a full-scale product. In the variation generation stage, decomposability can allow firms to experiment with more alternatives at the same time than an integrated search. However, in the selection and retention stages, a decomposed search may be more vulnerable to imperfect evaluation than an integrated search. It may increase the chance of missing out on promising alternatives after the first evaluation because the low cost of a decomposed search makes firms less committed to each alternative. We test our theory with a unique empirical setting, the recorded music industry, where singles (i.e., decomposed products) and albums (i.e., integrated products) have coexisted since the early twentieth century. In the variation generation stage, single-producing firms experiment with 35.22% more new artists than album-only-producing firms. In the selection and retention stage, single-producing firms are 69.57% more likely to neglect top-tier artists who failed in their first releases because single-producing firms have a higher performance target (i.e., lower commitment) than album-only-producing firms.
Keywords: Decomposability, Evolutionary Perspective on Search, Behavioral Theory of the Firm, Alternative Evaluation