Cost-reduction in the machine tool industry triggers a cumulative process through which investment activities in other industries are boosted, the speed at which technological innovations are installed and spread increases, and the marginal efficiency of capital of other industries rises.
Finally, for the economy as whole, cost reductions in the machine tools industry is a form of capital saving. Initially, the introduction of numerical control NC machine tools improved flexibility, allowed automation and reduced costs. Later increasingly refined computerised numerical control CNC machines, as well as computer-aided design CAD and computer-aided manufacturing CAM offered efficiency gains in material consumption, shortened the period between the design and the production process, and allowed the increasing control of complex production systems Mazzoleni, ; Arnold, The machine tool industry increasingly enables the working of complex production systems in which the traditional manufacturing tasks are intertwined with service activities and new technologies.
This has been widely documented in technical reports produced by the European network of machine tools producers Among the major industrial economies those countries which underwent a profound process of de-industrialisation in the second half of the last century were also those who lost the higher shares in world machine tool production.
The United States went from In contrast Japan and Germany followed the opposite trend during the same period, going from Whilst varying significantly between sectors and technologies these interdependencies can dramatically influence companies and indeed countries opportunities to capture value from their innovations, capabilities and market opportunities.
Loss of production capability for example, may make it impossible to realise a new product concept while poor understanding of production and supply may mean that new product designs are infeasible. Indeed product innovations themselves may be inhibited by the loss of opportunity to iterate product and process synergies.
However, in many industries such as automotives, electronics and software, it has been observed that companies which outsourcing too much run the risk of ceding and, sometimes, even destroying those capabilities and processes that have constituted their competitive advantages.
Moreover, outsourcing companies fail to capture the innovation opportunities that reside in the spaces of interaction and interfaces between manufacturing production and production related services Quinn and Hilmer, In sum, there is considerable evidence that many companies have overestimated the advantages of outsourcing and offshoring and underestimated problems, such as dealing with inventory, obsolescence, organisational traumas, reaching quality standards and maintaining in- house technological capabilities Ritter and Sternfels, First, countries relocating the major part of their manufacturing activities tend to experience a process of industrial commons deterioration, increasing relocation of production related services and technological lock-in.
Second, in contrast, those countries in which production is relocated experience an expansion of the manufacturing sector and an increasing co-location of other manufacturing firms as well as production related services providers. The transformation in the US software industry demonstrates this point well. In order to lower software development costs US companies initially started outsourcing mundane code-writing projects to Indian firms However Indian companies soon developed their technological capabilities in software engineering because of the experience provided by the routine work they had been given.
Thus India became increasingly able to attract more complex manufacturing and services activities to India such as developing architectural specifications and writing sophisticated firmware and device drivers Pisano and Shih, and ; Tassey, Of course a similar process may be triggered by off-shoring services providers as well as manufacturing firms. However, given the multiplier effects which characterise the expansion of the manufacturing base and the fact that certain services especially production-related services have to remain near production sites, it seems that off-shoring manufacturing activities is strategically more damaging than losing service-providers.
For example, as a result of outsourcing, the U. Surprisingly, IBM employs more people in the developing world than in America while in , the Chinese telecom giant Huawei applied for more international patents than any other firm in the world Cataneo et al.
Many of these resources are embedded in a large number of manufacturing and services companies as well as other organisations, typically universities and vocational schools.
The co-location of these actors means that the same companies and institutions can have access to their resources. This is the root of the industrial commons phenomenon As in almost all high-tech industries, product and process innovations are strongly intertwined.
The fact that manufacturing firms can undertake daily interactions with other manufacturers and the providers of production related-services locally constitutes a source of competitive advantage which benefits all actors involved i. It is important to stress that even the development of high-tech cutting-edge products often depend amongst other factors on the commons of a mature manufacturing industry.
The deterioration of the industrial commons caused by outsourcing can, in the long-run, affect the ability of a given economic system to introduce new products. This is because the suppliers, skills and services required to set up a new enterprise are no longer available locally.
This refers to macro-level forces that create systematic barriers to the diffusion and adoption of efficient technologies Arthur, One of the major factors associated with technological lock-in is the idea of increasing returns to adoption. Early adoption of a technological solution might give it enough edge to secure its dominance in the market. Even if an improved technology e. Fuchs and Kirchain explain that, as production in the optoelectronics industry has been outsourced to East Asia, the manufacture of better-performing designs developed in the US no longer pay off.
Thus they conclude that offshoring reduces incentives to innovation and can therefore lead to an erosion of technological competitiveness. Their concern not only focuses on the potential adverse consequences of the loss of production capacity within advanced countries, but also on the potential loss of technology dynamisms and competitiveness in global industrial systems as a whole.
The review of the manufacturing oriented versus service oriented debate showed how, over the latter part of the XX Century, the polarisation of the debate seriously undervalued the role of manufacturing development. The paper documented how offshoring might run the risk of breaking key innovation chains leading to technological lock-in, or perhaps better lock-out as countries lose the incentive and capability to develop and introduce new innovations and indeed products.
BELL, D. BEST, M. The political economy of industrial policy , Basingstoke: Macmillan. DOIG, S. Machinery and Economic Development , Basingstoke: Macmillan. GAGE, J. The new service economy: the transformation of employment in industrial societies. Why Does Manufacturing Matter? Which Manufacturing Matters? LALL, S. Thatcher for U. NIST Oxford Economics Ocampo, ed. PARK, S. PARK S. RYNN, J. Greenberg Center for Geoeconomic Studies, March. Main Currents in Cumulative Causation Theory.
London: McMillan. UNIDO Bell is the classic work on post-industrial society. On income-price linkages see Kravis et al. And finally on productivity and rising prices in services see Baumol et al.
At that time the bundling of manufactured goods to downstream services was a business strategy adopted by companies which lacked manufacturing strength in order to establish barriers to entry for potential competitors. Young and later discussed in Kaldor see above. Although it has outsourced the manufacture of its notebooks, iPod, and iPhone, Apple has preserved in-house technological capabilities by remaining involved in key phases of the production process.
Highlights of our work including a full range of sizes, weights, materials, examples of various applications and industries. Our success stories highlighting our expertise in finding solutions to complex problems and adding value for our customers. Diversity of our customer base is one of our greatest strengths: a wide range of industries and applications. A Variety of Sectors Manufacturing has undergone many changes over the years and will continue to change in the future , but the UK rose to be a big player in high-value sectors, such as the aerospace and pharmaceutical ones.
Rapid Prototyping During product development, we can manufacture small quantities of parts for fit and function testing, prior to production. Galleries Highlights of our work including a full range of sizes, weights, materials, examples of various applications and industries. So far, 3D printing and robotics have had a negligible impact on labour markets in most countries. So, while it is true that some services are increasingly contributing to economy-wide productivity growth, these services cannot thrive without a vibrant manufacturing sector.
Manufacturing still matters, a lot. This site uses Akismet to reduce spam. Learn how your comment data is processed. Friday, November 12, Magazine About Contact. Four clothing companies that may lead us away from the fast…. Should plant-based burgers be considered junk food? SaaS Software Development Trends. Mark Zuckerberg wants to turn Facebook into a metaverse company.
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Economic growth and industrialization have gone hand in hand Aspioneer Some would say that this statistic is unimportant because the traditional path of economic growth through industrialization has changed.
Manufacturing drives productivity growth and innovation The reason for the strong relationship between industrialisation and economic development is that the manufacturing sector is the driver of productivity growth.
Manufacturing helps services Every economic activity stimulates another economic activity.
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