The Effects of Industrial Systems on Technology Adoption

1
The Effects of Industrial Systems on Technology
Adoption

• Joung Yeo No
• Yonsei University

2
Industrial Systems in Technology Adoption

• The advantages of geographical agglomeration on
  knowledge spillovers and technology adoption
• Not only the size of cluster matters
• Does the organization of economic activities
  within a cluster matter as well?

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What is Industrial Systems?

• Relationship between the internal
  organization of firms and their connections to
  one another and to the social structures and
  institutions of their particular localities
• Industrial system has 3 dimensions
• Local institutions and culture
• Industrial organization
• Corporate organization

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Effect of Industrial Systems on Technology
Adoption

• The innovativeness of a region depends not only
  on the size and density of cluster, but
  also on how the economic activities within a
  cluster are organized.

• Silicon Valley vs. Bostons Route 128
  (Saxenian, 1994)

? Silicon Valley - open, flexible and
entrepreneurial environment
with many small-, medium-sized
plants. - decentralized regional
network-based system
? Route 128 - Rigid and hierarchical with few
dominant players. - independent
firm-based system
5
The Objectives

• 1. How the regional industrial system affects
  technology adoption by plants
• 2. How plants respond differently to
  geographical agglomeration and regional
  industrial system depending on their internal
  resources and information networks

6
Related Literature
Three relevant strands
1. Work on the sources of agglomeration
(Rosenthal and Strange 2001 Dumais, Ellison, and
Glaeser 2002 Holmes 2002).

• Work on other types of knowledge spillovers
  Patent citations
• (Jaffe, Trajtenberg, and Henderson 1993).

• 3. Work on the effects of industrial systems
  (Saxenian 1996) Descriptive studies on Silicon
  Valley and Route 128

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Do industrial systems affect plants decisions
to adopt technologies?
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Hypotheses

• H 1a
• Adoption of advanced manufacturing
  technologies is more likely with an increase in
  employment at small plants in the region.
• H 1b
• Adoption of advanced manufacturing
  technologies is more likely with an increase in
  employment at plants that are single-plant firms
  in the region.

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Hypotheses

• H 2a
• The effect of regional industrial system is
  greater for small plants than for large plants.
• H 2b
• The effects of regional industrial system is
  greater for single-plant firms than for plants
  that are part of multi-plant firm.

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Hypotheses

• H 3a
• The effect of knowledge spillovers from prior
  adopters is greater for plants with less internal
  resources.
• H 3b
• The effect of regional agglomeration is
  greater for plants with less internal resources.
• H 3c
• The effect of knowledge spillovers from prior
  adopters is greater for plants that are
  single-plant firms.
• H 3d
• The effect of regional agglomeration is
  greater for plants that are single-plant firms.

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Main Finding

• I. Technology adoption is facilitated by
  the industrial system that are characterized as
  follow
• That are agglomerated with small plants
• That are agglomerated with single-unit plants
• That are agglomerated with plants that are
  similar
• Plants with the following characteristics are
  more likely to benefit from the regional
  agglomeration and knowledge
• spillovers
• Plants that are small
• Plants that are single-unit

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DATA

• 1993 Survey of Innovation and Advanced Technology
• Unique, confidential, proprietary data
• Adoption of 22 advanced manufacturing
  technologies at the plant level
• 1902 plants covering an entire manufacturing
  sector across Canada
• Panel nature years of use for each technology
  (1984-1993)
• ? Panel of 3 intervals 1984-1986, 1987-1989, and
  1990-1992.

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DATA (Contd)

• Annual Survey of Manufactures
• - Collects information on the universe of
  manufacturing plants in Canada.

• National Input-Output Table
• - Input supply and output demand
  relationships among industries

• Census of Population
• - Demographic information

? Sample size 1,902 plants, 22 technologies, 3
time periods ? 106,188 obs.
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Estimating Equation
Dependent variable

• The probability of technology adoption is a
  function of
• 1.  Plant characteristics
• 2.  Local amenities, industry, technology and
  time fixed effects
• 3.  Regional agglomeration effects
• 4.  Technology spillovers
• 5. Industrial Systems

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Estimating Equation

• Pr(Adoptionptirt)
• f (IndustrySystemrt, KnoweldgeSpillovertirt.
  RegionalAgglomerationrit, PlantCharacteristicsprit
  , controls)

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Technological Dimension
6 technology groups 22 technologies
Design Engineering
Fabrication Assembly
Automated Material Handling
Manufacturing Information System
Inspection Communication
Integration Control

• Flexible manuf.
• cell or system
• NC/CNC
• Materials
• working laser
• Pick place
• robots
• Other robots

• Automated
• storage and
• retrieval
• system
• Automated
• guided
• vehicle
• system

• Automated equip. for
• inspection of in-process
• Automated equip. for
• inspection of final
• LAN for technical data
• LAN for factory use
• Intercompany computer
• networks
• Programmable controller
• Computer for factory floor

• Material
• requirement
• planning
• (MRP)
• Manufacturing
• resource
• planning
• (MRP II)

• Computer
• integrated
• manufacturing
• (CIM)
• Supervisory
• control data
• acquisition
• Aritifial
• intelligence
• expert systems

• CAD/CAE
• CAD/CAM
• Digital rep. of
• CAD output
• used in
• procurement

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Computer Numerically Controlled Machine
18
Automated Guided Vehicle System
19
Automated Storage and Retrieval System
20
Pick and Place Robot Pharmaceutical
21
Pick and Place Robot Cream cheese
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(No Transcript)
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Geographical Dimension
10 provinces 68 Economic Regions 290 Census
Divisions

• Rest of Country

Province
Economic Region
Census Division
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Map of Canada
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Functional and Industrial Dimension

• 1. Industrial Dimension
• based on industry classification
• 2-digit (22) and 3-digit (169) SIC
• 2. Functional Dimension
• based on similarities in input purchases

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A measure of related industries

• I develop a measure of related industries based
  on the similarity
• of input purchases across industries.

• ?ij correlation between industry i and industry
  j in terms of
• pattern of input purchases
• For each industry i, all other industries are
  classified into three groups
•  
• Similar industries 0.5 ?ij
• Moderately similar industries 0.2
  ?ij lt 0.5
• Different industries ?ij lt 0.2

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Summary Statistics of Sizes of Related
Industries
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Industrial Systems
Knowledge Spillovers
Technology Adoption
OrganizationalCharacteristics
Factor Conditions
Related and Supporting Industries
Demand Conditions
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Plant Characteristics
is a vector of plant characteristics which
includes Size, No. of commodities, Diversity,
Foreign ownership, Single- or Multi-plant firm
status
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Fixed Effects

• Region

• Industry

• Technology

• Time

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Agglomeration Effects

• Employment in region r at time t-1
• Share of scientists engineers in in the
  population in region r
• at time t-1
• Value of output of industry is input suppliers
  in region r at
• time t-1.
• Value of output of industry is output demanders
  in region r at
• time t-1.

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Technology Spillovers

• of adopters of tech t in Similar industries in
  region r at time t-1.
• of adopters of tech t in Moderately similar
  industries in region r
• at time t-1.
• of adopters of tech t in Different industries
  in region r at time t-1.

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Empirical Results

• I. Effects of Industrial Systems on Technology
  Adoption
• 1. Based on Plant Size
• 2. Based on Plant Status
• II. Effects of Regional Agglomeration Conditional
  on
• Organizational Capabilities
• 1. Plant Size
• 2. Plant Status

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1. Main Results
Dependent variable ADOPTIONptirt
Notes 1) ?2 statistically significant at p
lt 0.05 2) Also included are plant
characteristics, agglomeration effects, and fixed
effects.
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Plant Characteristics
Dependent variable ADOPTIONptirt
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I. Effect of Industrial Structure on
Technological AdoptionBased on Plant Size
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I. Effect of Industrial Structure on
Technological AdoptionBased on Plant Status
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I. Effect of Industrial Structure on
Technological AdoptionSmall vs. Large
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I. Effect of Industrial Structure on
Technological AdoptionSingle vs. Multi
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II. Effects of Regional Agglomeration
Conditional on Plant Size
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II. Effects of Regional Agglomeration
Conditional on Plant Status
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Conclusion

• I. Technology adoption is facilitated by
  the industrial system that are characterized as
  follow
• That are agglomerated with small plants
• That are agglomerated with single-unit plants
• That are agglomerated with plants that are
  similar
• Plants with the following Characteristics are
  more likely to benefit from the regional
  agglomeration and knowledge
• spillovers
• Plants that are small
• Plants that are single-unit