Technological developments and economies of scale in dairy industry

Abstract

This short paper reports the results of a survey of expert opinion aimed at assessing the impact of new technologies introduced to the dairy industry over the past 20 years and new technologies expected over the coming 5–10 years, on production costs of different sized firms. While recognising that many factors influence industry structure, if new technologies reduce the costs of large firms more than small firms, they provide an incentive for firms to grow and for industries to become more highly concentrated. If they reduce the costs of small firms more, they can help such small firms compete on more equal terms with their larger competitors. The evidence here suggests that most new dairy technologies slightly favour larger firms, though firms in the 250–1000 employee category are not disadvantaged relative to those with more than 1000 employees. However, information technologies for greater process control are substantially scale-increasing and give more benefits to very large firms. © 1998 John Wiley & Sons, Inc.