The Unintended and Indirect Effects of Performance Measurement and Regulation on UK Productivity: A Multidisciplinary Overview

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The Unintended and Indirect Effects of
Performance Measurement and Regulation on UK
Productivity A Multidisciplinary Overview

• Progress Report Loughborough University
• Naomi Brookes

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Presentation Structure

• Research Objectives and Methodologies
• Systematic Literature Review of Peer-Review
  Journals
• Grounded Theoretic Thematic Analysis of Trade
  Journal Article Abstracts
• Desk-based research on policy initiatives
• Thoughts on economic theories of regulation

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Research Objectives and Methodology

• I - To identify extant bodies of academic
  research on regulation or legislation within the
  field of engineering, technology and operations
  management.
• Systematic Literature Review of Peer-Review
  Journals
• II - To explore the actuality of legislative and
  regulatory impact at a sector/business level
• Grounded Theoretic Thematic Analysis of Trade
  Journal Article Abstracts
• III - To identify and delineate policy
  initiatives aimed at legislative and regulatory
  efficacy
• Desk-based research on policy initiatives

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Problems of Terminology

• What is an unintended or indirect effect?
• dependant on the purpose of the original
  legislation
• capture all effects
• How does UK Productivity decompose to specific
  sector and enterprise level MOPs?
• leadtimes, product cost, rate of new product
  introduction(cost, duration of NPD), agility?
• capture all
• Capture whenever legislation/regulation does
  something to a specific sector or enterprise.

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Presentation Structure

• Research Objectives and Methodologies
• Systematic Literature Review of Peer-Review
  Journals
• Grounded Theoretic Thematic Analysis of Trade
  Journal Article Abstracts
• Desk-based research on policy initiatives
• Thoughts on economic theories of regulation

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Systematic Literature Review

• Search Terms
• Chosen Journals IEEE Transactions on Engineering
  Management International Journal of Operations
  Management, International Journal of Production
  Research, Journal of Operations Management
  Management Science Omega Research Technology
  Management Academy of Management Journal
  Administrative Science Quarterly All 3 RAE
  publications for TOM group at ABS.
• Subject Legislation, Regulation
• Date Range 1/1/2002 current date
• Results
• 5 articles
• gt No extant body of research

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Presentation Structure

• Research Objectives and Methodologies
• Systematic Literature Review of Peer-Review
  Journals
• Grounded Theoretic Thematic Analysis of Trade
  Journal Article Abstracts
• Desk-based research on policy initiatives
• Thoughts on economic theories of regulation

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Grounded Theory Thematic Review
For each publication
Identify a sample population of trade magazines
and journals
Search within publication for legislation OR
regulation in defined time period
Manually review abstracts to those that relate
legislation/regulation to its effect
Inductively categorise and analyse abstracts
(c.f. grounded theoretic approach)
Combine analysis with existing analyses to -
identify overall themes - identify potential
case-study areas
N.B. A qualitative methodology
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Journals Sample
Sector Publication No. of Abstracts
Aerospace and Defence Flight International 386
Electronics Electronics Supply and Manufacture
Automotive Automotive Engineer 26
Food and Beverages Food Production Daily
Pharmachem Pharmaceutical Executives Magazine Chemical Week 233 209
Trans-Sector The Engineer The Economist 171 230
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(Very) Tentative Themes

• Regulation/Legislation effects on Innovation
• as a stimulator to innovation
• as an inhibitor of innovation
• regulation/legislation prompted by breakthrough
  product
• Legislation/Regulation Geographic Differentials
  Effects
• Inimical Effects of Regulation/Legislation
• internal
• supply chain
• Effects of Deregulation
• market growth and consumer saving
• other effects
• Effect of Antitrust/MA Regulation/Legislation

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Regulation/Legislation effects on Innovation

• Regulation/Legislation as a stimulator to
  innovation
• Noise regulation leads to innovative features of
  A300B B4 (F31)
• New fastener solution developed in response to
  end-of-life legislation(E55)
• US seniors Medicare legislation leads to
  innovative Pharma marketing solutions (e.g.
  Novartis Care Plan, Pfizers Share Card) (PL8)
• Pedestrian Safety regulations leading to
  innovative automobile design ( AEL4, E12)
• Global market for energy and environmental
  catalysts to grow to 13bn (E43)
• GE announce environmental industries central to
  business strategy(E23)
• Strengthening of Indias Patent laws leading to
  increase in proprietary drug market(PL4)
• Lack of regulation inhibiting introduction of
  in-flight mobile telecoms technology(F32)
• etc.

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Effects on Innovation contd.

• Legislation/Regulation as an Inhibitor to
  Innovation
• Regulation in Pharma leading to long product
  development leadtimes (e.g. EU paediatric drug
  testing)(PR67, PL6)
• Drug pricing regulations inhibit RD activity
  (PL49)
• end-of-life legislation prohibiting the use of
  plastics and composites in vehicle design ( E34,
  AEL8)
• Legislation/Regulation prompted by breakthrough
  product
• VLJ single pilot operation(F24)
• Regulation required for UAV(F27,28,29,33)

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Legislation/Regulation Geographic Differentials
Effects

• Development of platform modular designs for
  automobiles (AEL11)
• Disappearance of blockbuster drugs and greater
  market segmentation ( PR5, PL59)
• Frances difficulty in attracting aerospace FDI
  despite Airbus effect(F26)
• Moving flight-crew to flags-of-convenience FTL
  locations(F14,F15)
• Alignment of differentials to increase market
  size by Latin American Aerospace authorities(
  harmonisation of Part 145 regulations) (F17)
• EU regulation to include carriers in emissions
  trading considered trade barrier by US(F21)

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Inimical effects of Legislation/Regulation

• Internal
• FDA Part11 regulations will cost 12M per company
  (PR9)
• FDA Labelling regulations will cause labelling
  information requirements to double(PR28)
• CARB safety regulations leading to more on-board
  diagnostic testing(AER2)
• 54companies face fines over carbon dioxide
  emissions(E51)
• Regulations on passengers rights in the face of
  cancellations placing burdens on LCC(F12, F40,
  F43,F44,F46)
• regulation throttling the UK (AER9, E 47)
• EU regulation on departure/landing fees building
  in cost for small UK airports(F35)
• Supply chain
• REACH implications for fine chemical suppliers to
  Pharma(PR25)
• Redundancies in non-recyclable automotive
  components industry(E46)
• EU legislation on corporate governance will
  prevent the spread of best practice(E50)
• Use of steel instead of zinc fuel tanks in
  automobiles(E19)

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Effects of Deregulation

• Market Growth Consumer Savings
• Introduction of Part 135 regulations allows
  commuter services in China(F1,F9)
• deregulation of airlines in Taiwan(F45)
• deregulation of air transport in Saudi Arabia
  (F5, F8)
• passenger savings of 12bn euros pa on
  intra-European travel
• removal of legislation will enable deep-sea
  mining( E57)
• Other Effects
• Increase in smaller and corporate jet markets
  (buying and leasing) (F1,F9)
• leisure carriers moving to long-haul destinations
  because of competition from LCC ( F30)
• effect of SES will be 200,000 new jobs and
  reduced carbon emissions (F6)
• not enough pilots in Asia (in India and China in
  particular) (F10)
• lack of aerospace safety infrastructure in China
  (F25)
• relaxing emissions regulations helps employment
  in UK industry(E35)

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Effects of Anti-Trust/MA legislation/regulation

• Blocking of GE/Honeywell merger (F16)
• Prevention of GSK operating pricing differential
  in EU
• AstraZeneca fined 60M euros for abuse of patent
  legislation(PL65, PR36)

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Potential Case-Studies

• Cross-sectoral impact of REACH legislation
• Impact on fasteners design and manufacturers in
  the light of end-of-life regulations
• Effect of legislation and regulation on
  automobile design

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Presentation Structure

• Research Objectives and Methodologies
• Systematic Literature Review of Peer-Review
  Journals
• Grounded Theoretic Thematic Analysis of Trade
  Journal Article Abstracts
• Desk-based research on policy initiatives
• Thoughts on economic theories of regulation

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Policy Initiatives

• UK Government
• Better Regulation Commission (www.brc.gov.uk)
• Better Regulation Task Force
• European Commission's Communication for Better
  Regulation for Growth and Jobs in the European
  Union
• World Bank Report on Doing Business in 2006
  Creating Jobs

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Presentation Structure

• Research Objectives and Methodologies
• Systematic Literature Review of Peer-Review
  Journals
• Grounded Theoretic Thematic Analysis of Trade
  Journal Article Abstracts
• Desk-based research on policy initiatives
• Thoughts on economic theories of regulation

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Regulations for Health and Safety c.f. Viscusi et
al.

• Discrete not Continuous Nature of Safety
  Improvements

Option Cost Safety Level
A - manual guard C 12.5
B -automated guard 3C 25
C- software switch 7C 98

CX
BX
AX

• indirect effects measured by some
• form of opportunity cost?

safety level
100
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Porter and Linde(1995)

• If well-designed environmental regulations can
  lead to improved competitiveness why cant
  well-designed regulations and legislation per se
  improve competitiveness?