Flexible manufacturing technologies: Implications for competition between small and large firms

FLEXIBLE MANUFACTURING TECHNOLOGIES: IMPLICATIONS FOR COMPETITION BETWEEN SMALL AND LARGE FIRMS

B. ELANGO Baruch College, City University of New York

VANCE H. FRIED Oklahoma State University

The implementation of flexible manufacturing technologies (FMT) will cause increased competition between large and small firms. FMT will eliminate manufacturing flexibility advantages historically held by small firms and manufacturing effkiency advantages historically held by large firms. As a result, some small firms will be eliminated while others will successfully challenge larger firms. FMT use by small firms will lead to product proliferation and increasing use of cooperative strategies. In addition, the organizational structure of a small firm is more compatible with FMT than is that of a large firm.

In the recent decade a large number of companies have invested in flexible manufacturing technologies (FMT) and have reaped significant benefits. Because the successful business firm of the future will be characterized by speed and flexibility, FMT will become very important (Bower, 1989). Sriram and Gupta (1991), reviewed various studies on FMT showing that it could lead to

9 ii) iii) iv) v) vi)

30% reduction in production workers; 63% increase in machine utilization; 74% reduction in lead time; 66% reduction in work-in-progress; an increase in inventory turnover by 3.5 times; and cost saving up to 66% if utilized effectively.

Direct all correspondence 74078-0555.

to: Dr. Vance H. Fried, College of Business

Administration,

Stillwater,

The Journal of High Technology Management Research, Volume 4, Number 2, pages 241-2.54. Copyright 0 1993 by JAI Press, Inc. All rights of reproduction in any form reserved. ISSN: 1047-8310.

Oklahoma

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These benefits and advantages, as well as FMT’s limitations, have been discussed by many management and engineering authors alike. An important limitation, however, is that most of this writing has concentrated on large organizations, often ignoring the impact of FMT on the small firm. Indeed in America, FMT is being adapted primarily by large business firms. However small companies may be able to gain greater competitive advantage from FMT. In fact, in Japan small business orders account for 50% of the sales of FMT (Hayes, 1989). Small firms in Europe are also implementing FMT (Young & Greene, 1986). FMT may become crucial to the survival of many small businesses if, as many suggest, the next competitive battle is waged over manufacturers’ competence to overcome the age old tradeoff between efficiency and flexibility (DeMeyer, Nakane, Miller, & Ferdows, 1989). Traditional manufacturing methods have given a flexibility advantage to small firms and an efficiency advantage to large firms. FMT can give large firms more flexibility, enabling them to compete more effectively with small firms. But FMT also can give small firms greater efficiency, enabling them to compete more effectively with large firms. The use of FMT is an important element of “Manufacturing 21”, the Japanese project to develop a new manufacturing paradigm for the 21 st century. This new paradigm will feature small scale, geographically disbursed production. Its goal is to allow the manufacturer to economically “build one just for you” (Association for Manufacturing Excellence,’ 199 1). Although FMT will have a significant impact on the future of many manufacturers, it has not captured the interest of many academics. However this topic deserves to be the subject of extensive research activity in this decade. This paper will first present a brief discussion of the technical aspects of FMT. This will be followed by two general propositions that relate to the attractiveness of FMT to a small firm. The paper then develops several additional propositions which focus on the competitive implications of FMT to the entrepreneur. Because of the lack of existing research on FMT and the entrepreneur, these propositions are framed broadly.

FLEXIBLE FMT refers to computer-based grammable rather than fixed.

MANUFACTURING manufacturing

TECHNOLOGIES technologies

that make automation

pro-

When fully developed, FMT organizations use the computer to integrate the functional areas of marketing, design, manufacturing, inventory control, materials handling, and quality control into a continuous, sometimes unattended, round-the-clock operation. Actual installations today range from single, flexible manufacturing machining systems to “islands of automation” to fully computer-integrated manufacturing (CIM) operations (Nemetz & Fry, 1988, p. 627).

The successful adoption of FMT “can double or triple the efficiency of both capital and labor, and cut defects and the time it takes to introduce new products by an astonishing 90%” (Hayes, 1989: 64). [For a more detailed description of these technologies see Kochan, Merchant, Kozar, & Schaller (1986) or Meredith (1987).] However, FMT is not a panacea for all manufacturing businesses. FMT can best be used by manufacturers who produce a large variety of products in moderate or low volumes (Parthasarthy & Sethi, 1992). Figure 1 gives a broad indicator of the appropriateness of

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Technologies

FIGURE 1 High

Dedicated system QUANTIT!

I

Flexible Manufacturing

Programmable

Low

System

I

High

1.ow

PARTS VARIETY Sawer:

Adapted from Groover & Zimmer (I 986).

FMT. On one extreme is the dedicated system which is most appropriate for pure mass production. The dedicated system is one where the entire factory is built to specification for a particular product and quantity. This ensures efficient selection and utilization of machines. At the other extreme is the job shop which needs general purpose machines. Thus, FMT might not be cost effective for either highly standardized or customized products. In addition, some products do not demand the high level of precision in manufacturing which FMT provides. An example could be a manufacturer of non-precision standard components. Furthermore, FMT should not be viewed as just an investment in machinery, but rather as a competitive tool. In other words, the company should see whether FMT as a manufacturing policy fits with its company strategy (Skinner, 1978). For example, an engine manufacturer might consider FMT because engine manufacturing requires the high degree of precision that FMT provides. FMT would be attractive if the manufacturer already produces several varieties of engines in small or moderate numbers. FMT would be more attractive if quick delivery could be used as an effective marketing tool. FMT would be even more attractive if the firm’s product design staff was more capable and innovative than its competitors. PI:

The attractiveness of FMT will vary greatly from industry to industry, and to a lesser extent, from firm to firm within the same industry. SMALL

Although FMT may hold potential it for a variety of reasons.

FIRM ADOPTION

OF FMT

for a large number of small firms, many will not adopt

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The cost is prohibitive for many firms. A small starter FMS will cost between 300,000 (Sriram & Gupta, 1991) and two million dollars (Young & Greene, 1986). Some small firms who can afford FMT may not adopt it due to fear of the risks involved from higher capital requirements and dependence on a new system with which it is unfamiliar. Some entrepreneurs may be interested in FMT but reluctant to implement it because they fear it will cause them to lose power. Since a source of individual power within an organization is skill in critical functions (Carroll & Tosi, 1977), an entrepreneur may feel that bringing in a new manager with a high level of skill critical to the organization (which the entrepreneur does not posses) may result in the entrepreneur losing hold of his/her company.

However, some small firms will implement FMT. Many are in a position to afford small systems. In fact, Meredith (1987) argues that small firms may be more intelligent buyers of FMT.

FMT

Rather than the greenfield approach taken by their larger competitors, the small firms typically pick the critical element, or elements to automate.... That is, they are, and have to be, very selective in where they invest their limited capital. Because of this more limited incremental investment, and because they are closer to the application, small business managers often can more clearly see the benefits and problems of their automation decisions and be more effective in their implementation (p. 256). Furthermore, controlled risk-taking is a characteristic of many entrepreneurs. In addition, many entrepreneurs will not be intimidated by the new skill requirements. In fact, a new breed of entrepreneurs, made up of people highly skilled in FMT, is likely to arise. P2:

The adoption rate of FMT by small firms will be highly uneven.

COMPETITION

BETWEEN

LARGE

AND SMALL

FIRMS

We operated for eons using the assumption that the volume of orders drives most of the decisions we make in manufacturing. That assumption is simply no longer true (Ettlie, 1990, p. 4; Ettlie & Reza, 1992).

FMT, when implemented, will create turbulence in many industries. This is due to the rapid change in the competitive cost position of small and large firms. Small firms will be challenged in their respective market niches by the large firms as large firms enter small markets which they formerly ignored. Conversely small firms may be able to challenge large firms in industries where FMT eliminates scale economics. The impact of FMT on relative cost position can be seen in Figure 2. Curve A represents the production cost curve for a high volume producer. Production cost decreases rapidly as volume increases due to production scale economies. Curve B represents a low volume producer, Cost does not decrease significantly as volume increases because this producer does not benefit from production scale economies. These differing cost curves give some advantages to both large and small firms. While the high volume producer has a major cost advantage in large volume production, it faces a cost disadvantage in small lot production

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Technologies

FIGURE 2 HIGH

COST

Range of FMT

HIGH

VOLUME

due to the inflexibility of its manufacturing system. However, this changes dramatically with FMT (Sethi & Sethi, 1990). Both large and small firms who implement FMT will have roughly the same, almost flat, production cost curve (Curve C in Figure 2). It should be noted that in addition to scale economies, per unit production costs may also decrease with volume due to learning effects. Thus the large firm may still have a production cost advantage over the small firm even if there are no scale economies (Amit, 1986). However, as with scale economies, the magnitude of learning effects will vary from industry to industry. In addition, in many cases learning is rapidly diffused throughout the industry. If so, there is no cost advantage vis a vis competitors to being a high volume producer (Lieberman, 1987, 1989). Finally, Meredith (1987) argues that FMT will likely shorten product life cycle, thus decreasing the potential for learning effects. In addition to production scale economies (PSE), there can be non-production scale economies (NPSE) in areas like advertising and R & D. If NPSE exist in an industry, large firms will have a cost advantage in serving large markets. However, as was true of PSE, they may be at a disadvantage in smaller markets. For example, a mass marketer in the restaurant industry has a clear cost advantage in marketing to a large, homogeneous market like fast food. However, it might be at a cost disadvantage in marketing a more complex product to a small market like gourmet food. Administrative overhead is another type of non-production cost where a small firm might have a distinct advantage when serving small markets. Thus Curves A and B may also be applicable to non-production costs. However, FMT will not have any direct impact on non-production costs. The change in the nature of competition can be illustrated by means of the matrix shown in Figure 3. All industries are divided, based on their PSE and NPSE. Cell A represents industries with both high PSE and NPSE. An example would be the automobile industry.

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FIGURE 3 SCALE MATRIX HIGH

A

B

BIG (AUTOMOBILE) PRODUCTION SCALE ECONOMICS

BIG (CHEMICAL)

i/

C

i

(FAS;:OD,

~

D (TURNik%:OJECTS)

LOW HIGH NON PRODUCTION

LOW SCALE ECONOMICS

This industry requires a high volume of production along with heavy distribution, marketing and R&D on a global basis. Cell B represents industries with high PSE but low NPSE. An example of an industry in this cell is standard chemicals. This industry requires large plants to be competitive, but has little NPSE as the product is commodity like. Cell C has high NPSE and low PSE. For example, the fast food industry has virtually no PSE but very large NPSE in areas such as advertising. Cell D is the current domain of small firms. Here there is very little NPSE or PSE. Industries in this cell are often fragmented and dominated by small firms. This cell may not have been attractive to the large firm in the past since it did not offer any benefits from scale economies. Indeed, in many cases the large firms were at a cost disadvantage. The advent of FMT has changed this. The entry barrier to the large firm of low demand and hence uncompetitive production costs is removed. The large business now has the option to enter industries in Cell D. In fact it may now have a cost advantage due to economics of scope. Economies of scope exist where the same equipment can produce multiple products more cheaply in combination than separately. For example, a large industrial machinery manufacturer may be operating in Cell B. It might not have included various types of machinery in its product line due to low product demand. These market segments would belong in Cell D. But after FMT eliminates its production cost disadvantage, the large firm may enter hitherto neglected segments in search of the high marginal profit generated by sales to this segment (assuming the firm has excess production capacity). This approach has been characterized as the agile manufacturing paradigm (Runkle, 1991). Many small firms failing to implement FMT will be eliminated as the cost advantage they once had in PSE are eliminated. A firm failing to implement FMT may be at a production cost disadvantage even for small orders. In addition, the existing advantage in transportation costs held by many small businesses due to being a local company (Porter, 1980) will disappear because FMT allows a large business to increase its number of manufacturing facilities without losing PSE.

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Flexible Manufacturing Technologies

On the other hand, some industries which were in Cell B will move into Cell D as FMT eliminates PSE. Entire industries which were open only to large firms will see entry by small firms as the large firm’s cost advantage will become quite small or even disappear after the implementation of FMT. In addition, FMT will improve the small firm’s image as a state of the art manufacturer. (Congden, Gopinath, & Schroeder (1989) found that customers sometimes insist that a potential supplier have sophisticated machinery even though it is not necessary from a manufacturing standpoint.) P3:

The implementation of FMT will result in increased competition large and small firms.

P4:

In some industries the implementation tion of many small firms.

Cooperative

between

of FMT will result in the elimina-

Strategies

FMT will lead to more industries being in Cell C. Some industries will move from Cell A to Cell C as PSE is eliminated. In addition, large firms competing in Cell D will try to create NPSE so they can move the industry, from Cell D into Cell C (Porter, 1980). In order to compete effectively in Cell C, a small firm will need to improve its NPSE. But it may not be possible for a small firm to do so independently. Rather, NPSE may be reduced through cooperation with other small firms. Cooperative strategy in the form of franchising is already widely employed in both retailing and service industries. Cooperative strategy for small manufacturing firms offers the potential for flexibility and the creation of a coherent product line, without dampening the creativity of the small firm. Small firms might team up with other small firms by means of joint activities to share costs, thereby gaining NPSE. For example, Lee and Mulford (1990) report on the activities of a co-op of small Japanese machine tool manufacturersone of the first groups to successfully implement FMT (Jaikumar, 1986). Even though members of this co-op often directly compete against each other, they also engage in joint marketing and co-ordinate their product lines so that a wide variety of products is offered. Cooperation may also be very important in research and development (Hage, 1988). It might also allow small firms to pool their “learning”, thus allowing small firms to compete in industries with a significant learning curve. Knowledge sharing between manufacturing facilities is a major feature in “Manufacturing 21”, in which the Japanese argue: Entry barriers to many industries will become lower because of lower economy of scale: rather, specialization with cooperation (combinations) will be the norm. The relative ratio of sunk cost in high-tech and information industries will decrease because information will be increasing shared. Companies may become customers, suppliers, partners, and competitors with each other, all at the same time. Small-scale distributed production will become possible through micro-electronic technology and the increasingly mutual dependance of producers and consumers, and perhaps their being located closely together (Association for Manufacturing Excellence, 1991, pp. 6-7).

P5:

After FMT is implemented, there will be an increase in the use of cooperative strategies by small firms.

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Product Proliferation Alternatively small firms within Cell C industries may compete by increasing the level of product customization they offer. As the number of products in an industry proliferates, per product volume will decrease. In some cases, this may cause the industry to move from Cell C to Cell D. By moving into Cell D the small firm has neutralized the large firm’s competitive advantage in NPSE. In fact, as discussed earlier, in some cases the small firm will have a non-production cost advantage in serving small markets. P6:

As competition between small and large firm intensifies, trend towards product proliferation.

FMT AND ORGANIZATIONAL

there will be a

STRUCTURE

Nemetz & Fry (1988) point out that FMT will cause “the task environment of competing manufacturing firms [to] become more turbulent, in terms of both rate of change and complexity.” Highly competitive manufacturing companies will be under great pressure to be both highly efficient and highly responsiveness to changing customer needs (De Meyer et al., 1989). This change in the competitive environment will bring about new strategies and structures (Chandler, 1962). As both Drucker (1990) and Hayes & Jaikumar (1988) point out, the organizational structure which worked well in the stable environments of the past will have to be changed to allow the organization to compete in a dynamic environment. Nemetz & Fry argue that successful implementation of FMT will require greater interdependence among the organization’s various subsystems, highly flexible and responsive links to environmental constituencies, the substitution of self regulation [or clan control] for bureaucratic controls, and an organic structure. Furthermore, these changes will have to occur throughout the organization, not just in manufacturing. Large firms tend to have highly complicated organizations with many separate units which have little contact with one another. These complex organizations themselves require complex coordination (Carroll, 1988). The larger the organization, the more elaborate the structure, the more specialized the tasks, the more differentiated its units and the more developed its administrative components. In addition, large firms may have problems with the rapid decision making requirements of an FMT environment. Large firms tend to be bureaucratic, whereas a dynamic environment requires an organic structure (Mintzberg, 1979). Therefore, large firms will have to restructure their organizations. The process of structural change may often prove tumultuous due to changes in the organizational power structure, management systems, etc. Indeed Hayes & Jaikumar (1988) feel that the greatest impediment to improvements in manufacturing “lies not in the inherent demands of the hardware but in the managerial infrastructure that has become embedded in most U.S. companies over the past 50 years.” On the other hand, small organizations have less specialized functions, fewer levels of management, and less standardization than large firms. A small firm can operate with a relatively simple structure since it does not have major problems with co-ordination and mutual adjustment as there are few people, and hence better interaction and feedback. Small firms are able to make decisions faster as they are under the direct control of top

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management. Top management also often has a major ownership position in the firm (Mintzberg, 1991). Thus the small firm’s organizational structure is more suited to FMT (Meredith, 1987). This structural advantage may be significant in competition between large and small firms. P7:

Small firms will face fewer structural problems the implementation of FMT.

than will large firms in

Large Firms Imitate Small As was pointed out above, large firms implementing FMT will need to make significant structural changes. This will be especially true in Cell D where they will be in direct competition with the more appropriately structured small firm. The problem will also be significant in industries in Cell C if small firms can successfully lower NPSE through cooperative strategy. The organization structure of the large firm will be broken into small, self-managed units due to changes in method of production (Toffler, 1981; Galbraith, 1982). Large firms will likely adopt some version of what Hayes & Jaikumar refer to as a “mini-factory” structure. This structure breaks the organization down into numerous small units, each “tightly integrated, organizationally flat, almost entirely self-managing, and highly responsive to evolving market needs”. This structure encourages participation, self control, individual initiative, independent judgment and open communication. Large organizations will be characterized by duplicating operating divisions, and coordinated using information communication. Thus the structure ultimately employed by the large firm will be similar to that of the small firm. P8:

Large firms implementing FMT in Cells C & D will try to create structures similar to those of small firms.

This raises an interesting question as to whether a large firm operating numerous, highly decentralized units is more efficient than a small firm. Because it would have multiple boundary spanners and information gathering units, the large firm’s opportunities for organizational learning are greater. In addition, the large firm’s multiple units may give the large firm slack not available to the small firm. A unit of a large firm with a shortage of production capacity might be able to utilize excess production capacity in another unit. Slack may also be crucial to organizational survival if the environment becomes hostile. On the other hand, it is unlikely that a large firm could ever become as flexible and dynamic as a well-managed small firm. Managerial pundits like Peter Drucker (1985) and Raymond Miles (1989) argue that the future will feature smaller organizations because they are more flexible than large firms. FMT will cause more industries to become fragmented (Cell D). Historically, entrepreneurs “can thrive... in highly fragmented industries, where small flexible organizations can move quickly into and out of specialized market niches, and so outmaneuver big bureaucracies” (Mintzberg & Quinn, 1991: 603). In addition, the small firm may be able to attract more qualified managers. As Hayes & Jaikumar (1988) point out, managers will need to be “generalists-people with an architect’s skill, who can pull out a fresh sheet of paper and design something new.” In other words, these managers need to be entrepreneurs. In fact, the tasks performed by the man-

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agers of an individual unit of a large firm will be very similar to those performed by managers of a small independent firm. However, the small firm can offer the managers more freedom and the chance for substantial monetary reward.

DISCUSSION These propositions provide a basic direction for studying the impact of FMT on firm size. These propositions need to be empirically tested. At first blush, this would seem to be a relatively simple matter of merely adding firm size as a variable to existing FMT research. Unfortunately there is a dearth of empirical work on FMT in general (Parthasarthy & Sethi, 1992). Thus, one must not only address research design and measurement issues directly relevant to firm size, but also to FMT research in general. Significant issues need to be resolved in order to adequately pre-operationalize constructs to enhance construct validity, and provide external relevance. Construct

Operationalization

Several constructs have already been operationalized. This is especially true of constructs with roots in industrial organization economics. Constructs such as production scale economies, non-production scale economies, and product proliferation have been the object of extensive study (Scherer, 1980). Similarly the operationalization of organization structure can draw extensively on organization theory literature. However, several other important constructs are in need of extensive pre-operationalization. Firm Size Firm size can be viewed in a variety of manners. From a financial perspective, one may choose to focus on assets. From a marketing perspective, sales may be appropriate. From a managerial perspective, it is more appropriate to use number of employees to operationalize firm size since this would likely have the greatest impact on management practices within a firm. (This is the approach taken by the Small Business Administration in defining what makes one a “small” manufacturer.) Thus, the operationalization of firm size will differ based upon the question being researched. FMT Adaptation FMT adoption should not be operationalized as a dichotomous variable. Firms may convert to FMT in a phased manner. In addition, many may opt to permanently use a mix of conventional machinery and FMT systems. Thus, FMT adaption should be operationalized as a continuous variable. Congden, et al., (1989) took this approach. They operationalized FMT adaptation based on the value added by the FMT machinery in an organization. Similarly, Parthasarthy & Sethi (1992) have proposed operationalizing FMT adaption based upon the relative level of capital spending on FMT. Unfortunately, most accounting systems are not designed to gather data in this manner. Alternatively, they propose the use of a semantic differential scale. This scale uses subjective judgment to operationalize the use of FMT in five differ-

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ent areas-product design, machine feeding, making products, machine transfer, and design-process integration. In addition, Parthasarthy & Sethi point out the possible major moderating effects of firm strategy upon PMT adaption. Firms may adapt FMT operationally but its impact will be limited if the firm’s strategy does not take advantage of the flexibility FMT offers. Cooperative

Strategy

As Proposition 5 states, FMT may lead to the increased use of cooperative strategies. Cooperative strategies are an area of increasing research interest. However, empirical research in this area is still limited. The work of Dollinger (1990) and Nielson (1988) may provide a solid base upon which to build. Performance Another issue that needs to be addressed by researchers is that what constitutes organizational performance in an FMT organization. For some of our propositions (e.g., Proposition 4), survival (Carroll & Delacroix, 1982) may be an appropriate measure. In other cases, more complex measures are appropriate. Parthasarthy & Sethi have suggested that performance in FMT organizations be examined both in terms of output efficiency and input efficiency. Output efficiency would include traditional measures like return on assets, but also be enlarged to include items such as product quality and warranty claims. Input efficiency would look at variables such as product manufacturing cost, worker productivity, etc. This suggestion merits further development. Internal Validity In designing FMT research, two threats to internal validity are especially important--sampling artifacts and time (see Poole and Van de Van, 1989 for a general discussion of these issues). Sampling artifacts are erroneous results induced by biases in the selected sample rather than any real difference existing in the population. Sampling artifacts may be a major problem in FMT research since the impact of FMT is industry specific (see Proposition 1). Thus, cross sectional data and statistical techniques requiring large sample size may be of limited use in PMT research. The temporal issue is important because the level of technological development of FMT is not even across all industries. Therefore, use of FMT may vary according to the opportunities and threats (from FMT oriented competitors) provided by the current level of FMT in that particular industry. Hence, firms will be at different stages of evolution and the issue of antecedent and precedent condition may not be clear. External Relevance Bettis (199 1) argues that management researchers need to concentrate on issues that will be relevant in the near future, rather than concentrate on studying events of the past with elegant methodologies. The impact of FMT on firm size is clearly relevant in the near future. However, researchers studying FMT run the risk of becoming so wrapped up in creating research methodology that FMT may already be implemented and its results felt by

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most firms before their research is completed. The result will be research which has only a modest post-hoc impact on practice.

DIRECTIONS

FOR FUTURE

RESEARCH

Given the propositions we have outlined and the research issues discussed above, we suggest that FMT research in the near term stress two types of studies. For propositions like 7 and 8 which deal with organization structures, case studies are needed (Mintzberg, 1983). Individual case studies should be done on several firms, both large and small, who adapt FMT. Analysis of these studies would provide a strong basis for future research, as well as provide useful information in their own right. Propositions dealing with FMT adoption and firm strategy may be studied by longitudinal studies focussing on a particular industry or industries with a relatively long history of FMT use. The use of medium grain or hybrid methodologies (Harrigan, 1983) would be highly appropriate given the dynamic interaction between industry, FMT adaptation, and competitive conduct of firms. These hybrid methodologies use multiple sites, multiple data sources, and a intricate sample design. The use of multiple sites enables the researcher to discover distinct patterns or trends across firms. Multiple data sources like field interviews, published materials, discussions with industry experts, industry and customer questionnaires, and investigator inferences provide a rich and varied view of the implications of FMT upon competition. Intricate sample design allows the researcher to improve research results by splitting the sample into meaningful groups based upon factors which effect competitive condition and FMT adaption. As Harrigan points out, this type of study is particularly suited to the analysis of strategic response by individual firms to significant industry wide challenges. Certainly, FMT poses significant challenges and opportunities in many industries. In addition, because it causes the researcher to have multiple field exposures to the topic, it may lead to additional insights about this phenomena. Regardless of research methods used, FMT deserves intensified research interest. It is already having a major impact on many firms, and will have an even larger impact in the future. An aggressive and immediate research agenda for FMT is warranted.

CONCLUSION FMT will significantly increase the level of competition between large and small manufacturing firms. What will happen when this occurs ? Cochran (1972) discusses a similar change in competitive balance, that occurred fifty years ago, but was also caused by major new production technology. Electricity available in all urban areas by 1930, enabled small plants with separately motorized tools to operate their machinery as efftciently from the standpoint of power as a large factory. This meant that in many manufacturing industries there were no longer . scale economics, and small business flourished both as subcontractors and independent producers even in technically advanced industries as aircraft, electronics, and motor vehicles. (p. 249)

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ACKNOWLEDGMENTS The authors are indebted to Steve Barr, Tom Box, Ben Oviatt, Jack Reeder and Margaret White

for comments

was a graduate

on earlier

student

drafts of this paper. This paper was written

at Oklahoma

while B. Elango

State University.

NOTES 1. This publication was based on a english summary of thinking which appeared as a collection of six articles in Masuaki Iwata et al. (1989).

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