Engineering and Technology Management

1. Engineering and Technology Management Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. Author: Michael Oden, Ph.D. Presentation by: João Letras Rodrigo Rodrigues ITT – Lecture 9

2. Topics to be Addressed: • Introduction • 2. Inter-Firm Copperation and Collective Efficiencies • 3. Case Studies • a) Furniture Industry • b) Aerospace Manufacturing • c) Advanced IT technology in Rural Region • 4. Conclusions Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. ITT – Lecture 9

3. 1. Introduction Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Evolution of economic development theory • prior 1980s: how the relationships between local assets and firms influenced location and investment decisions • after 1980: how inter-firm relationships influence firm location and investment decisions ITT – Lecture 9

4. Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Factors for this change in the way of thinking: • decline and restructuring in U.S. mass production • prominence of regional cases • disintegration of large firms ITT – Lecture 9

5. U.S. Firm Characterisation Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Heavy on Competition / Light on Cooperation • “Arms Length” transactions / Rigid Hierarchies • Weak Ties between Firms and Suppliers • Legal Conflicts with Competitors and Suppliers • Poor Coordination by Business Associations, Unions, Gov. Support Structures ITT – Lecture 9

6. Goals of national and state programs for industrial policy in U.S.: • stimulate technology adoption and process improvement • improve access to capital • stimulate and share research and development • improve relationships/logistics between suppliers and producers Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. ITT – Lecture 9

7. Key Factors For Aiding Competitiveness: Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • State, Federal and Local Government Funding • Government Intervention • Creation of Inter-Firm Intermediaries ITT – Lecture 9

8. 2. Inter-firm Cooperation and Collective Efficiencies Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Geographical Clustering • Joint Projects ITT – Lecture 9

9. Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. ITT – Lecture 9

10. Types of Collective Action and Collective Efficiencies Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Influencing Government Policies + • Market Coordination - • Market Development + • Improving Labor and Mngt. Skills +- • Improving Quality through Organizational • or Technical Change +- • R&D + • Improving Labor Standards+Norms - • Strategic Planning and Markt. For Industry +- ITT – Lecture 9

11. 3. Case Studies Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. a) Furniture Industry b) Aerospace Manufacturing c) Use of Advanced IT in Rural Region ITT – Lecture 9

12. 3 a. Furniture Industry Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Employs 490.000 Nationally • Concentrated in NC, L.A., Mississippi, N.Y., MI • 70% of Establishments have less than 20 employees ITT – Lecture 9

13. 3 a. Furniture Industry – Intermediary Inst. Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Concentration in NC • AFMA, IHRFA, NHFA. • Services Provided • - Import/Export Contacts • - Lobbying Activities • - Training Centres (Operational+Mngt Skills) • - R&D (Industrial Extension) • - Strategic Planning on Retail ITT – Lecture 9

14. 3 a. Furniture Industry – Problem and Solution Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • National Associations Create Geographical Asymmetries (NC Cluster) • Little attention given to skills upgrading • SOLUTION: . Creation of Local Institutions (TMFA) • . Encourages Use of Local Suppliers • . 38% regional employment growth • 1986-96 (national = 2%) ITT – Lecture 9

15. 3 b. Aerospace Manufacturing Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Heavily Dependent on Gov. Investment (80’s) • 2,2 million workers in 1988 / 1,7 million in 1998 • L.A. (CA), Seattle (WA), St. Louis (MO), Boston (MA), Long Island (NY) ITT – Lecture 9

16. 3 b. Aerospace Manufacturing Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Deep Relation Between Companies and Suppliers • Intense collaboration with Suppliers • Limited to Specific Projects • Associations (Gov. Lobbying and Promote Exports): • Aerospace Industries Association • American Electronics Association • National Machine Tool Association ITT – Lecture 9

17. 3 b. Aerospace Manufacturing – Problem and Solution Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Long Island most affected by cutbacks • . Dramatic downsizing (>10.000 in 5 years) • . Profound Regional Restructuring • . Not a Cyclical Phase • SOLUTION: . Department of Economic Development • . Agglomerated all Actors • . Coordinate Applications for Fed. Assist. • . Implement and Package Programs • . Market Services to Clients ITT – Lecture 9

18. 3 b. Aerospace Manufacturing – Solution Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • New Programs Tailored to Defence Needs • Firms Cover 50% Technical Assistance Costs • Case by Case Analysis of Firms • PROGRAMS: • Industrial Effectiveness Program • Econ. Development Skills Training Program • Global Export Market Service • Assistance for support on R&D ITT – Lecture 9

19. 3 b. Aerospace Manufacturing – Results Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • New Process, Market, Product, Capital • Establish a Reward System for Meeting Goals • Create a System to Monitor Performance • Still, Recovery was not complete • Abandon Defence Contract Dependency • Despite no guarantee in data validity: • . Reduction in Gov. Dependency • . Increase in employment • . Sales Growth and Diversification ITT – Lecture 9

20. 3 c. Use of Advanced IT in Rural Region Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Telecommunications: • Catalyses Economic Growth; • Enhance Intra and Inter-Community Communication; • c) Information Exchange. ITT – Lecture 9

21. 3 c. Use of Advanced IT in Rural Region Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • Problems in Rural Areas: • Population Density and Income; • High Connecting Costs (no economies of scale/scope). Results in negative feedback loop; ITT – Lecture 9

22. 3 c. Use of Advanced IT in Rural Region - Solution Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • ACEnet Ventures: • Non-Profit Community Development Institution • Serves 27 High Poverty+Unemployment Counties • Low Median Income • Attempt to Develop Industrial Structure and Culture ITT – Lecture 9

23. 3 c. Use of Advanced IT in Rural Region - Solution Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • ACEnet Goals: • Improve Access • Increase Technology Literacy • New Internet Technology • . Competitiveness • . Market Reach • ACEnet Technology Center Initiatives: • High-Speed Portal / ISP • Training in Basic Computer and Internet Skills • Stimulus to Business Startups on E-Commerce ITT – Lecture 9

24. 4. Conclusions Increasing Collective Efficiencies: The Role of Regional Initiatives in Improving Firm Performance in the U.S. • U.S. viewed as having weak Inst. of Collective Action • Industry Associations focused on lobbying and marketing activities • Government action fills gaps but does not substitute • Relation to Case Studies: • Government Action vs. Collective Action vs. Associations ITT – Lecture 9