Innovation and technical change: A case study of the U.K. tractor industry, 1957 1977

Abstract

In previous work it was established that the U.K. tractor industry was characterised by a high degree of technical change and that this was brought about by a process of more or less continuous incremental innovation. What was lacking was an analysis of how much technical change had been introduced and an indication of the role played by technical change in determining the performance of the U.K. tractor industry internationally. This paper concludes that on the average technical change in the industry had increased by as much as 150 percent during the years 1959–1977, though there is some indication that the rate of change might now be slowing somewhat. In order to determine the relative importance of technical change a method was developed to operationalise the distinction between price and non-price competition as well as the idea of intrinsic (technical) and associative (non-technical) factors as constituents of the latter. Based on cross-sectional data for the year 1978, it has been possible to show that British manufacturers tend to produce moderately priced tractors of low to medium technical sophistication: that German manufacturers produced the most technically sophisticated tractors; that the Italian manufacturers are not generally more sophisticated, technically, than the British producers except with respect to their development of four-wheel drive; and that COMECON-based producers combine a very low price with some degree of technical sophistication. Finally, it has been possible to show that the tractors with the highest sales are among the less sophisticated in each of the power ranges investigated and that new entrants used technical sophistication as an element of their entry strategy. The answer to the question of what allows the market leader to be market leader required the development of measures for associative non-price factors, such as the availability of a dealer network brand loyalty, resale prices of tractor models, etc. By performing a regression analysis on these measures along with previously derived measures of quality-adjusted price and relative technical sophistication it has been possible to show that market leadership is achieved as a result of a balance of a number of factors, the most important of which are the size of the dealer network, warrants cost, advertising, technical sophistication and price.