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The typical approach to developing complex products is to decompose the product into systems, and these into components. We introduce a new notion of system modularity based upon the way components share design interfaces across systems. Modular systems are those whose design interfaces with other systems are clustered among physically adjacent systems, whereas integrative systems are those whose interfaces are physically distributed or functionally integrative across all or most other systems. Our research method allows us to study how system modularity impacts design team interactions. Our approach is illustrated by analyzing the development of an aircraft engine.