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The Effects of Industrial Systems on Technology Adoption

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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The Effects of Industrial Systems on Technology Adoption

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  1. The Effects of Industrial Systems on Technology Adoption Joung Yeo No Yonsei University

  2. 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?

  3. 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

  4. 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

  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: 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).

  7. Do industrial systems affect plants’ decisions to adopt technologies?

  8. 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.

  9. 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.

  10. 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.

  11. 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

  12. 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.

  13. 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.

  14. 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

  15. Estimating Equation Pr(Adoptionpτirt) =f (IndustrySystemrt, KnoweldgeSpilloverτirt. RegionalAgglomerationrit, PlantCharacteristicsprit, controls)

  16. 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

  17. Computer Numerically Controlled Machine

  18. Automated Guided Vehicle System

  19. Automated Storage and Retrieval System

  20. Pick and Place RobotPharmaceutical

  21. Pick and Place RobotCream cheese

  22. Geographical Dimension 10 provinces 68 Economic Regions 290 Census Divisions Province Economic Region Census Division Rest of Country

  23. Map of Canada

  24. 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

  25. 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

  26. Summary Statistics of Sizes of ‘Related Industries’

  27. Industrial Systems Knowledge Spillovers Technology Adoption Factor Conditions OrganizationalCharacteristics Related and Supporting Industries Demand Conditions

  28. Plant Characteristics is a vector of plant characteristics which includes {Size, No. of commodities, Diversity, Foreign ownership, Single- or Multi-plant firm status}

  29. Fixed Effects • Region • Industry • Technology • Time

  30. 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.

  31. 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.

  32. 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

  33. 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.

  34. Plant Characteristics Dependent variable: ADOPTIONpτirt

  35. I. Effect of Industrial Structure on Technological AdoptionBased on Plant Size

  36. I. Effect of Industrial Structure on Technological AdoptionBased on Plant Status

  37. I. Effect of Industrial Structure on Technological AdoptionSmall vs. Large

  38. I. Effect of Industrial Structure on Technological AdoptionSingle vs. Multi

  39. II. Effects of Regional Agglomeration Conditional on Plant Size

  40. II. Effects of Regional Agglomeration Conditional on Plant Status

  41. 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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