Purpose This paper aims to examine how an organization can achieve higher performance through integrating supply chain product co‐development (SCPC) and modular product design. Design/methodology/approach Based on a comprehensive review of literature on product development, supply chain management and system theory, the four proposed hypotheses concerning the relationships among SCPC, product modularity (PM), manufacturing capabilities and product performance (PP) were tested empirically through a sample of 251 Hong Kong manufacturers. Findings SCPC is found to have a direct and positive relationship with PM and PP. PM improves flexibility and customer service and in turn PP. Research limitations/implications Given the cross‐sectional nature of the study and the focus on manufacturing industry, future research should replicate this study in different industries with more longitudinal studies. Practical implications The study provides solid evidence that managers should involve their suppliers, internal functional units and customers early in their design stages, especially in the decisions relating to PM. The study has also demonstrated that product co‐development affects PP in both direct and indirect ways. Originality/value The present study empirically verifies the relationships between supply chain integration and modular product design by means of SCPC and PM. Similar empirical research is absent from the literature on relevant disciplines.
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