Technology and Global Industry Companies and Nations in the World Economy (1987) / Chapter Skim
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Innovation and Industrial Evolution in Manufacturing Industries
Innovation and Industrial Evolution in Manufacturing Industries
Pages 16-48
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From page 16... ...
The dynamic model discussed below describes how change in product ~nnovabon, process innovation, and organizational structure occurs in patterns Hat are observable across industries and sectors. The dynamic model allows consideration of the different conditions required for rapid innovation and for high levels of Output and productivity.
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From page 17... ...
Even an enterprise classified as a single industry might find itself competing with many disparate groups of firms with different product lines or lines of business. Thus, to group productive units sensibly into industry or market segments, one must ask: In what product Lines do units view each other as direct competitors?
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From page 18... ...
Knowledge of the production process as a system of linked productive units is a prerequisite to understanding innovation and competition ~ ndusuial context. Earlier work on Me management of technology has focused at a micro level, dealing win similandes among particular successful cases of product or process innovation (Utterback, 1975)
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From page 19... ...
A greater degree of competition based on product differentiation usually develops, and dominant product designs may begin to emerge. At the same time, forces Hat reduce He rate of product change and innovation are beginning to build up.
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From page 20... ...
So 3''/~ jU ir ~A
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From page 22... ...
The dominant new product design signals a significant transformation, affecting He type of innovation that follows it, the source of information, and the size, scope, and use of formal research. As the productive unit evolves into this specific state, He set of competitors often becomes an oligopoly and competition begins to shift to product price, which means Hat product design and process design become more and more closely interdependent as a line of business develops.
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From page 23... ...
PROCESS INNOVATIONS ~,` A production process is the system of process equipment, work force, task specifications, material inputs, work and information flows, and so form employed by a unit to produce a product or service. In the fluid state, the productive unit will typically be small, with limited resources.
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From page 25... ...
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From page 26... ...
Maintenance, scheduling, and control will increasingly be handled by specialized labor rawer clan directly during production. The production process reaches the specific state when it becomes highly developed and integrated around specific product designs, and as investment becomes correspondingly large.
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From page 27... ...
Dunn~, periods of high target and technical uncertainty, a productive unit must be focused to make progress; for a group to be successful in an uncertain environment, individuals in the organization must act together. This rype of organizational structure is called organic (Burns and Stallcer, 19611.
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From page 28... ...
28 o° 1~ on A e '
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From page 31... ...
31 id cO o ca cat Icy - ~ ~ a' .= of ~ ~ no 4, .
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From page 32... ...
When the technical and market environment becomes stable-and when grown of a productive unit relies more on stretching existing products and processes-the ability to hold a steady and consistent course will be highly valued. Rewards in a stable situation will be centered on financial results and on predictable, incremental performance in product and process change that build on past investments.
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From page 33... ...
The established units responded to competition from Me newcomers by emphasizing process innovations, whereas the newcomers sought entry and strength through product innovation. The three successful new entrants just listed were responsible for half of the major product innovations and only one of the nine process innovations Tilton identified in that 18-year period; however, the three principal established units (divisions of General Electric, Philco, and RCA)
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From page 34... ...
Since 196S, however, We basis of competition in the semiconductor industry has changed; as costs and productivity have become more important, the rate of major product innovation has decreased, and effective process innovation has become an important factor in competitive success. Like the transistor in the electronics industry, the DC-3 stands out as a major change in the aircraft and airlines industnes.
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From page 35... ...
The appearance of a dominant design shifts We competitive emphasis to favor those firms with a greater skill in process innovation and process integration, and with more highly developed internal technical and engineenng skills. Many firms will be unable to compete effectively and will fail.
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From page 36... ...
In their words, neither large absolute size nor market power is a necessary condition for successful competitive development of most · · mayor Innovations. Mueller and Tilton contend Hat once a major ~nnovabon is established, there will be a rush of firms entering Be newly formed industry or adopting a new process innovation.
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From page 37... ...
An existing distribution network can suddenly be threatened by a new technology Cat requires sharply reduced servicing or maintenance, or by the entrance of a large product line. An existing patent may expire Although Mueller and Tilton contend Rat industries become stable when patent positions expire, the present argument is that this is more likely to be a period of invasion of the industry by a new wave of product and process change-or, in a few cases, the revitalization of the dominant technology itself.
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From page 38... ...
automobile industry: 189~1962. Data from Fabns (1966)
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From page 39... ...
The post-World War IT stability in market shares and number of firms reflects the fact that approximately three-quarters of the major product innovations occurred before the start of the war.3 Innovations in product accessories and styling concepts were tested in the low-volume, high-profit luxury automobile. Conversely, incremental innovations were more commondy introduced in lower-pnce, high-volume product lines.
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From page 40... ...
In the semiconductor industry, Texas Instruments, in particular, has stressed production process innovation and integration, and Tilton's data (1971) show a pronounced shift toward process innovation by new firms as the Industry developed and as Heir market shares expanded.
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From page 41... ...
Firms producing woven woolen carpets had strong ties with wool suppliers and controlled, through purchases, nearly the entire wool market. Synthetic materials not only enabled the new tufting technology to be highly productive, but they allowed the carpet market to expand dramatically with falling, rather than nsing, marginal costs, an experience that was foreign to the manufacturers of woven carpets (Reynolds, 19671.
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From page 42... ...
As the industry enters the ~ansii~onal state, and product requirements become more defined, fewer firms enter and a larger number either may merge or fail. Finally, as Be industry enters Me specific state, there are only a few large firms, each controlling a consistent share of the market, and possibly a few small finns serving highly specialized segments.
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From page 43... ...
Sylvania in the United States was the first to innovate with fluorescent lighting, and it increased its market share from 5 to 20 percent at General Elecmc's expense. Harvested, naturally formed ice for refrigeration was replaced by machine-made ice and later by mechanical refrigeration; it was not the ice-harvesi~ng companies that innovated in mechanical means of ice production, nor was it the companies producing ice and ice boxes who innovated in the area of electromechanical refrigeration.
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From page 44... ...
By the same token, potential for product innovation and competi~aveness depends increasingly on ability to innovate in manufacturing processes. Finally, there exists a hierarchy of productive units a product for one is part of the process for another and therefore affects productivity directly.
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From page 45... ...
A subdivision Mat may be We logical functional locus for He introduction of a new product because of sim~lanty of market may have a hierarchical, bureaucratic organization more appropnate to a mature old product and therefore be unable to accommodate itself to He innovation. This may have been one of He main reasons why vacuum tube divisions that initially seemed to be at He forefront of transistor and semiconductor technology (where Hey benefited from government support)
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From page 46... ...
4. Fabas studied 32 major product innovations and found that 70 percent occurred before 1935.
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From page 47... ...
1966. Product Innovation in the Automobile Industry.
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From page 48... ...
1975. A dynamic model of process and product innovation.
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