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The Effects of Industrial Systems on Technology Adoption Joung Yeo No Yonsei University Industrial Systems in Technology Adoption The advantages of geographical agglomeration on knowledge spillovers and technology adoption Not only the size of cluster matters

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industrial systems in technology adoption
Industrial Systems in TechnologyAdoption
  • 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?
what is industrial systems
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
effect of industrial systems on technology adoption
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. Boston’s 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

the objectives
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

related literature
Related Literature

Three relevant strands:

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

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).
hypotheses
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.

hypotheses9
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.

hypotheses10
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.

main finding
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
slide12
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.

data cont d
DATA (Cont’d)
  • 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.

estimating equation
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

estimating equation15
Estimating Equation

Pr(Adoptionpτirt)

=f (IndustrySystemrt, KnoweldgeSpilloverτirt. RegionalAgglomerationrit, PlantCharacteristicsprit, controls)

technological dimension
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
geographical dimension
Geographical Dimension

10 provinces

68 Economic Regions

290 Census Divisions

Province

Economic Region

Census

Division

Rest of Country

functional and industrial dimension
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
a measure of related industries
A measure of ‘related’ industries:

I develop a measure of ‘related’ industries based on the similarity

of input purchases across industries.

ρij = 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 ≤ ρij

Moderatelysimilar industries: 0.2 ≤ ρij < 0.5

Different industries: ρij < 0.2

slide28
Industrial Systems

Knowledge Spillovers

Technology

Adoption

Factor Conditions

OrganizationalCharacteristics

Related and Supporting Industries

Demand Conditions

plant characteristics
Plant Characteristics

is a vector of plant characteristics which includes

{Size, No. of commodities, Diversity, Foreign ownership,

Single- or Multi-plant firm status}

fixed effects
Fixed Effects
  • Region
  • Industry
  • Technology
  • Time
agglomeration effects
Agglomeration Effects

Employment in region r at time t-1

Share of scientists & engineers in in the population in region r

attime t-1

Value of output of industry i’s input suppliers in region r at

time t-1.

Value of output of industry i’s output demanders in region rat

time t-1.

technology spillovers
Technology Spillovers

# of adopters of tech τ in Similar industries in region r at time t-1.

# of adopters of tech τ in Moderately similar industries in region r

at time t-1.

# of adopters of tech τ in Different industries in regionr at time t-1.

empirical results
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

1 main results
1. Main Results

Dependent variable: ADOPTIONpτirt

Notes: 1) * χ2 statistically significant atp < 0.05

2) Also included are plant characteristics, agglomeration effects, and fixed effects.

plant characteristics35
Plant Characteristics

Dependent variable: ADOPTIONpτirt

conclusion
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
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