The apparel industry is no stranger to discussions of “high-performance work systems,” team or “modular” assembly, and innovative human resource practices. Modular assembly alters the traditional method of production, which relies on individual operators to perform one or two tasks repetitively, by substituting teams of workers to sew and assemble parts or all of a garment. Throughout the 1980s, team-based assembly was heralded by the garment industry trade press, the major apparel manufacturing association, major fiber and textile producers, the nonprofit Textile Clothing Technology Corporation, and the Amalgamated Clothing and Textile Workers Union as a means of reducing costs and enhancing workforce performance.

Despite the advocacy for modular assembly, these practices have not diffused to a significant degree in the U.S. apparel industry to date. In 1992, about 80% of garments were sewn and assembled by the traditional Tayloristic progressive bundle system. Only 9% utilized the modular system.

Drawing on a unique set of data, this chapter examines the determinants of the diffusion of modular production and the impact of these systems on firm performance relative to traditional assembly systems in the apparel industry. The data set allows the modeling of different classes of adoption determinants, particularly those related to the product market. The data also permit assessment of how modular systems affect firm performance relative to other managerial innovations.

Our empirical results demonstrate that the adoption of modular systems arises from the same product market forces driving the adoption of manufacturing practices related to new forms of apparel retailing. In particular, modular systems have been adopted by those business units that have adopted information systems increasingly required by apparel retailers.