Production Of Capital Goods Research Articles

The Response of Capital Goods Shipments to Demand Over the Business Cycle

This paper studies the behavior of producers of capital goods, examining how they set shipments in response to fluctuations in new orders. The paper establishes a stylized fact: the response of shipments to orders is more pronounced when the level of new orders is low relative to the level of shipments, usually after orders plunge in recessions. This cyclical change in firm behavior is quantitatively important, accounting for a large portion of the steep decline in equipment investment in the 2001 and 2007-09 recessions. We examine economic interpretations of this stylized fact using a model where firms smooth production with a target delivery lag for new orders. Heightened persistence in orders growth may explain part of the greater responsiveness of shipments to orders, as may increases in firms' target buffer stocks of unfilled orders relative to shipments.

Exploring the alignment between service strategy and service innovation

PurposeLiterature is relatively sparse on describing how companies should align their determinants for service innovations with their different types of service strategies. This study seeks to explore the alignment between three types of service strategies and determinants for service innovations.Design/methodology/approachA qualitative, multi‐case research design on 12 Western European capital goods manufacturers including 24 service innovation projects was employed. The study is based on multiple sources of evidence: internal documentation of service innovation and development projects and, most importantly, interview data and participation in internal innovation workshops. Traditional inductive research methods were used to analyze the case studies.FindingsThese indicate that aligning service strategies with determinants for service innovations is very complex. The configurations of the determinants are associated with the innovation success. Alternative configurations of determinants can create counterproductive effects and can limit the success of service innovation projects as well as implementation of service strategies.Research limitations/implicationsThe study is based on interviews and case studies, but the external validity (generalizability) of the alignments could not be assessed accurately. Future research would benefit from insights obtained from quantitative data. The findings supplement existing research on success factors for the service business in manufacturing companies.Practical implicationsThe findings imply that managers contemplating a specific service strategy have to consider the service innovation and reframe the determinant for service innovations accordingly. Companies trying to implement an after‐sales service strategy should focus on a narrow range of determinants for service innovations. The resulting configurations guide managers to set up an efficient and effective service innovation management that helps them to implement their service strategy through successful service innovation project.Originality/valueThis empirical study shows that the configuration of determinants for service innovation differs for each service strategy. Whereas, the few similarities in determinants on service innovation are mainly other applications of existing theories on service innovation, the differences modify the existing theories.

Credit Allocation and the International Rules on Subsidies: Have the Anti-Crisis Measures in Brazil Gone Too Far?

The different economic stimulus packages architected around the world to control and overcome the recent financial crisis contained a series of credit policies which, due to the presence of (i) favorable conditions granted to lenders, such as low interest rates, and also of (ii) export performance and/or national content requirement clauses, may be inconsistent with the current international rules on subsidies. In Brazil, the incentive measures called for a vigorous expansion of state banks’ operations in the credit markets as a means to compensate for the shortage of private credit that affected the economy during the crisis. The Program for Sustainability of Investments of the Brazilian Bank for Economic and Social Development (PSI - BNDES) was created in June 2009 and is responsible until today for more than $70 billion dollars already borrowed or yet to be given to companies for areas such international trade, innovation, and acquisition or production of capital goods. This paper investigates the consistency of PSI with the current international rules on domestic subsidies. In order to do so, it (a) describes the main aspects and rules of PSI credit lines (international trade; innovation; and capital goods) and also the (b) central concepts of the Agreement on Subsidies and Countervailing Measures of the World Trade Organization in order to then be able to (c) analyze the consistency of PSI with this agreement. In the end, the paper will briefly present alternative measures for policy makers so that domestic legislation in the field of credit policy can be issued or be brought into conformity with international rules.

Business Groups, Foreign Direct Investment, and Capital Goods Trade: The Import Behavior of Japanese Affiliates

We examine the impact of buyer-supplier relationships within business group on capital goods trade in the context of foreign direct investment by buyer firms and capital goods producers. A simple model in which cost-reducing relationship specific investments are underlying business group ties suggests that:1) foreign affiliates of business group firms have a greater propensity to import capital goods from the home country, increasing Japanese exports, 2) if the establishment of overseas affiliates by business groups firms attracts FDI by their capital goods suppliers, the ‘trade creating’ impact of business group ties may disappear or even be reversed. Empirical analysis of capital goods imports by 1790 manufacturing affiliates operated abroad by Japanese multinational firms in 1996 provides broad support for these predictions and demonstrates a sizeable impact of buyer-supplier ties in business groups on trade. Affiliates of member firms of horizontal and vertical business groups with supplier ties exhibit a greater propensity to import from Japan, but this impact is mitigated or transformed into a smaller import propensity if the groups’ capital goods producers have substantial manufacturing investments abroad.

A Note on Factor Prices and Technical Progress

Changes in the factor prices have important impacts on characteristics of investments, such as the expected lifetime, the factor intensity and the factor productivity of new capital goods. Considering both changes in factor prices as well as technical progress, different effects arise at either high substitutability or low substitutability in production. It can be shown that for a production function close to the Cobb-Douglas case, higher interest rates and technical progress will decrease the expected lifetime, the capital intensity and productivity, while the reversed outcome occurs at lower substitutability between factor inputs.

CRIAÇÃO DE CAPACITAÇÕES EM INTEGRAÇÃO DE SISTEMAS: O CASO DO PROGRAMA CBERS. - DOI:10.5585/RAI.2010431

Um modelo de organizacao industrial baseado em integracao de sistemas vem sendo crescentemente utilizado por firmas que lideram esforcos bem sucedidos de inovacao tecnologica. Estas firmas estabelecem organizacoes temporarias, baseadas em projetos, definem arquiteturas de sistemas e delegam parte das atividades - design e producao de subsistemas - a uma rede hierarquizada de organizacoes, e se responsabilizam pela integracao final destes sistemas. Tendo a visao baseada em recursos como referencial teorico, este artigo analisa desafios para a producao de bens de capital intensivos em tecnologia – sistemas complexos – em paises de industrializacao recente. Utilizando um programa de cooperacao tecnologica entre o Brasil e a China para a producao de satelites de sensoriamento remoto como estudo de caso, e tendo o projeto como unidade de analise, este artigo sustenta que em ambientes marcados por elevada complexidade e intensa mudanca tecnica as capacitacoes em integracao de sistemas, em seus diversos niveis, constituem uma forma efetiva de catching-up tecnologico. A capacidade de gerenciar o ciclo de vida de sistemas complexos, concebidos com vistas ao atendimento de requisitos de stakeholders locais - em vez de adaptar sistemas concebidos para outros ambientes fisico-sociais -, permite a introducao efetiva da mudanca tecnica no sistema economico.

Service business development in small and medium capital goods manufacturing companies

PurposeThe purpose of this paper is to focus on how small‐ and medium‐sized enterprises (SMEs) from the capital goods manufacturing sector develop the service business. Assuming the service business development depends on contingency factors, the paper aims to explore how SMEs align external environment, strategy and organizational design.Design/methodology/approachA multi‐case study design on capital goods manufacturers from Italy, Sweden and Switzerland was employed.FindingsService strategy formation and implementation in SMEs depend on their value chain position and the business environment. Suppliers with few customers selling directly to customers increasingly offer logistic and repair services as well as R&D‐oriented services. In contrast, OEMs selling through distributors do not primarily extend the services offered, but rather reconsider service process configuration together with distributors. Altogether, the paper describes four different service responses to specific combinations of value chain position and business environment.Research limitations/implicationsThe findings are limited to the capital goods manufacturing industry.Originality/valueWhereas previous research neglects how SMEs develop the service business, this article offers key insights in the interrelationship among the value chain position and the business environment as well as the service strategy formation and implementation.

Environmental Assessment of the CIESOL Solar Building after Two Years Operation

Life cycle assessment is applied to assess the environmental benefits and trade-offs of a solar-assisted heating, ventilating, and air-conditioning (HVAC) system installed in the CIESOL building in Almeria (southeastern Spain). The environmental performance of this system is compared to that of a conventional HVAC system using a heat pump. The study evaluates these systems from cradle to grave, and the impact assessment includes, in addition to the CML2001 method, an impact category dealing with impacts on freshwater resources. The results show that the solar-assisted HVAC involves lower impacts in many impact categories, achieving, as an example, a reduction of 80% in greenhouse-gas emissions. On the other hand, key weak points of this system are the production of capital goods, but specially water use for cooling, due to its high impact on freshwater resources. Minimization of water requirements should be a priority for further development of this promising technology.

Exploring the interrelationship among patterns of service strategy changes and organizational design elements

PurposeThe purpose of this paper is to explore the patterns of service strategy changes in manufacturing firms and indicates how each pattern is interrelated with modifications in organizational design elements.Design/methodology/approachThe paper draws on a longitudinal study using a survey of 97 manufacturers of capital goods. In addition, 15 case studies have been conducted. Survey and qualitative data are obtained in 1997, 2001, and 2004.FindingsThe findings highlight four patterns of service strategy changes: from customer service strategy to after‐sales service provider, from after‐sales service provider to customer‐support service provider, from customer‐support service provider to development partner, and from customer‐support service provider to the outsourcing partner. Evidence of specific alignment between service strategy and organizational design elements is provided.Research limitations/implicationsThe main limitation of this paper is the purposive sample.Practical implicationsManagers should follow the patterns of service strategy changes by extending the service offerings and modifying the organizational design elements.Originality/valuePrevious studies investigate service strategies and organizational design elements only at a specific time, which leads to a static perspective. This paper offers insights into interrelations among service strategy changes and organizational design elements.

A Criticism of Boehm - Bawerk’s Interest Rate

Boehm-Bawerk (1891) asserts that there are three origins for interest: time preference, diminishing marginal utility and round-about production (or productivity of capital goods). The first and second origins are named as subjective origins. In this paper these two origins are introduced and then criticized with a new, innovative, theoretical approach. The results of the study reveal that these two origins for positive market interest rate do not have any rational bases. These origins come from irrationality behavior. Also a mathematical model that shows positive time preference and that has strong direct effect on inflation is introduced.

Time-Varying Capital Requirements in a General Equilibrium Model of Liquidity Dependence

This paper attempts to quantify business cycle effects of bank capital requirements. The authors use a general equilibrium model in which financing of capital goods production is subject to an agency problem. At the center of this problem is the interaction between entrepreneurs' moral hazard and liquidity provision by banks as analyzed by Holmstrom and Tirole (1998). They impose capital requirements on banks and calibrate the regulation using the Basel II risk-weight formula. Comparing business cycle properties of the model under this procyclical regulation with those under hypothetical countercyclical regulation, the authors find that output volatility is about 25 percent larger under procyclical regulation and that this volatility difference implies a 1.7 percent reduction of the household's welfare. Even with more conservative parameter choices, the volatility and welfare differences under the two regimes remain nonnegligible.

Visitando vizinhos: uma análise da série histórica de produção de bens de capital no Brasil utilizando diagramas de recorrência

O objetivo do texto é identificar possíveis não linearidades na série de produção de bens de capital brasileira no período janeiro/1975-janeiro/2002. Utilizando a técnica de análise de séries temporais com diagramas de recorrência e o método de previsão por nearest neighbors, apresentam-se evidências de que os investimentos no Brasil - tomando como proxy a série temporal de produção de bens de capital - seguem uma dinâmica com um componente não linear determinístico não desprezível. Embora não tenha sido objetivo do texto identificar a possível fonte dessa dinâmica, os resultados empíricos alcançados autorizam a supor que a dinâmica macroeconômica brasileira pode ser mais sensível à variabilidade da política econômica do que normalmente se supõe. A implicação disso é que a capacidade de prever esses efeitos, com uma margem estatisticamente aceitável de significância, pode ser muito reduzida em períodos em que a dinâmica da série se torna mais sensível em relação às condições iniciais; as técnicas aqui empregadas, entretanto, sugerem que em certa medida é possível, senão prever a evolução dos investimentos, pelo menos identificar os períodos nos quais essa previsão é menos confiável.

Configuration of product‐service systems

PurposeTraditionally, many manufacturers of cost intensive capital goods have largely focused on design, realization and distribution of high‐quality products. Meanwhile, their industrial customers increasingly expect to be provided with diverse services. These services predominantly aim at enhancing the functional and the economical performance of the underlying products. To systematically exploit the potential of services, an appropriate combination of products and services becomes crucial. For achieving desired benefits for both manufacturers and their industrial customers, product‐service systems (PSS) have to be configured systematically. This paper aims to address these issues.Design/methodology/approachThe presented approach considers customer, manufacturer and product life cycle specific aspects within the configuration of PSS. The paper presents a framework which comprises all activities necessary to conduct a systematic configuration of PSS. Throughout the paper, an elementary case study illustrates the activities.FindingsExemplary use cases indicate that the configuration of PSS using the presented approach is beneficial.Research limitations/implicationsThe case study is a success. However, especially the increasing complexity of modern capital goods demands for developing a suitable application software that supports the configuration.Originality/valueThe paper presents a successful application for conducting a customer, manufacturer and product life cycle‐oriented configuration of PSS.

Performance of interest rate rules under credit market imperfections

The stabilization effects of Taylor rules are analyzed in a limited participation framework with and without credit market imperfections in capital goods production. Financial frictions substantially amplify the impact of shocks, and also reinforce the stabilizing or destabilizing effects of interest rate rules on output. However, these effects are reversed relative to new Keynesian models: under limited participation, interest rate rules are stabilizing for productivity shocks, but imply an output-inflation tradeoff for demand shocks. Moreover, because financial frictions imply excessive fluctuation, stabilization via an interest rate rule can be a welfare-improving response to productivity shocks.

Dealing with the risks of innovation: A study of capital goods producers in Portugal

AbstractProduct innovation is a subtle process, frequently leading to shifts in the competitiveness of firms. Developing products in an environment undergoing technological change is given to frequent failure, even in well‐established and sophisticated organizations. In order to tackle competitiveness and to deal with innovation uncertainty, firms develop modes of innovation and innovation processes. In this study, we analyze the dominant uncertainties associated with the innovation process and modes of innovation of leading equipment and machinery producers.For that purpose we analyze the presence and types of risks and uncertainties applied to product innovation, and we test the use of two modes of innovation proposed in recent literature: (1) the Science, Technology, and Innovation (STI) mode, which is based on the production and use of codified scientific and technical knowledge, and (2) the Doing, Using, and Interacting (DUI) mode, which relies on informal processes of learning and experience‐based know‐how.The study is based on an exploratory multiple case study of producers of equipment and machinery in the industrial region of Aveiro, Portugal, and carried out under the research “Project Enterprise of the Future” at the University of Aveiro. The results of our study highlight several avenues that can help researchers to better channel their efforts in studying the phenomenon and help managers to foster innovation at their companies and in this way their firms' competitiveness. © 2009 Wiley Periodicals, Inc.

Customer enquiry management and product customization

PurposeThe customer enquiry management (CEM) process is of strategic importance in engineer‐to‐order contexts but existing literature does not adequately describe how firms support delivery date setting and order acceptance decisions in practice. This paper seeks to explore how and why the CEM process varies between companies in the capital goods sector, thereby taking a contingency theory approach.Design/methodology/approachMulti‐case study research involving 18 Italian capital goods manufacturers in four industrial sectors. Face‐to‐face interviews with senior representatives have been conducted. Companies have been grouped into five clusters, based on similarities in their CEM decision‐making modes, to aid analysis.FindingsThree contingency factors were found to be particularly relevant in determining CEM modes: degree of product customization, flexibility of the production system, and uncertainty of the context. These factors affect the choice of specific CEM decision‐making modes. However, a high level of cross‐functional coordination and formalization of the process were found to constitute best practices whatever the contingency factors.Research limitations/implicationsThe research focuses on companies belonging to the Italian capital goods sector – findings may differ in other countries and sectors.Practical implicationsThe results indicate that all firms, including small and medium‐sized companies, should implement high levels of cross‐functional coordination and formalization in their CEM practices, in order to improve their performance. For other aspects of the CEM process, including supplier and subcontractor monitoring, the company context will indicate whether these aspects are required, according to a need of matching the approach to CEM with specific sets of contingency factors.Originality/valueThis paper provides a rare insight into the CEM processes found in practice.

Visualizing Knowledge in Project-Based Work

This article considers how visual practices are used to manage knowledge in project-based work. It compares project-based work in a capital goods manufacturer and an architectural firm. Visual representations are used extensively in both cases, but the nature of visual practice differs significantly between the two. The research explores the kinds of knowledge that are (and aren't) developed and made visible in strategizing and planning activities. For example, whereas the emphasis of project-based work in the former firm is on exploitation of knowledge and it visualizes its project context largely in commercial and processual terms, the emphasis in the latter is on exploration and it uses a wide range of visual materials to understand physical interdependencies across the project boundary. We contend particular kinds of visual tools can help project teams step between exploration and exploitation within a project, and articulate the types of representations, foci of attention and patterns of interaction involved. The findings suggest that business managers can make more deliberate choices about how knowledge is made visible, and can change visual practice to align the project with exploring and exploiting opportunities. It raises the question: What don't you see within your organization? The work contributes to academic debates about managing through projects, strategising and organizing, while the focus on visual representation disrupts the tacit-codified dichotomy in the broad debate on knowledge and learning, and highlights the craft skills central to strategizing and organizing.

Due date (DD) quotation and capacity planning in make-to-order companies: Results from an empirical analysis

The current competitive context puts manufacturers under increasing pressure to provide products and services that meet the particular requirements of individual customers, calling for high flexibility in business processes. The complexity and the uncertainty of demand are particularly high in customized contexts, such as the make-to-order (MTO) and engineer-to-order (ETO) sectors, where the ability to deal with more and more differentiated requirements in terms of product features, delivery lead time and cost is crucial. In order to be competitive in such a context, due date (DD) quotation and capacity evaluation at the customer enquiry stage are of strategic importance, having a large impact on the company performance. Despite the large impact on company performance, the importance of DD setting and order acceptance processes and related decisions is often underestimated in practice and the issue is underexposed in the literature. As the applicability of most of the proposed models is limited and there are too few empirical studies describing the practices adopted for capacity and delivery lead-time management in industrial contexts, this study is aimed at developing an understanding of these practices based on a sample of 15 Italian capital goods manufacturers. An interpretative framework is proposed in order to identify the main contextual factors impacting company choices. A model that formalizes the decision process for setting DDs in the analyzed cases is then proposed, suggesting different procedures depending on the type of enquiry submission (DD set by companies or customers) and customer order (fast or slow).

Investigating implementation issues for workload control (WLC): A comparative case study analysis

Workload control (WLC) is a method of production planning and control, which when commenced at the customer enquiry stage, has particular relevance to producers of highly customised products. Although previous research has suggested that WLC has great potential to improve performance, only a few successful case studies have been reported. To facilitate more widespread use of WLC, this paper seeks to investigate issues that arise from implementing WLC systems through a rare comparative case study analysis. Two companies are studied, a capital goods manufacturer and a precision engineering sub-contractor. The study initially identifies emerging research questions that address 17 implementation issues, including those related to the market/customer, the primary manufacturing process, the WLC system requirements, the flow of information and embedding WLC within the organisation. For each implementation issue, an appropriate response is given that leads to changes in the theory underpinning WLC or the development of WLC implementation strategy. Finally, areas in need of further research are suggested, providing direction for fellow scholars in the field of WLC. These areas include the further refinement of the implementation requirements for WLC in additional case study settings and the need for simulation studies to verify the effectiveness of some of the proposed changes to the underlying theory of WLC.

Visual practices and the objects used in design

Recent interest in material objects – the things of everyday interaction – has led to articulations of their role in the literature on organizational knowledge and learning. What is missing is a sense of how the use of these ‘things’ is patterned across both industrial settings and time. This research addresses this gap with a particular emphasis on visual materials. Practices are analysed in two contrasting design settings: a capital goods manufacturer and an architectural firm. Materials are observed to be treated both as frozen, and hence unavailable for change; and as fluid, open and dynamic. In each setting temporal patterns of unfreezing and refreezing are associated with the different types of materials used. The research suggests that these differing patterns or rhythms of visual practice are important in the evolution of knowledge and in structuring social relations for delivery. Hence, to improve their performance practitioners should not only consider the types of media they use, but also reflect on the pace and style of their interactions. L'intérêt récemment suscité pour les objets matériels – ceux qui interagissent tous les jours – a débouché sur l'expression de leur rôle dans la littérature consacrée au savoir et à l'apprentissage dans l'organisation. Ce qui manque, c'est de savoir comment l'usage de ces objets est modélisé dans l'environnement industriel et dans le temps. Cette étude porte sur cette lacune et insiste en particulier sur les matériels visuels. Les pratiques sont analysées dans deux cadres conceptuels très différents l'un de l'autre: un fabricant de biens d'équipement et un cabinet d'architecte. Les matériels sont assimilés à des objets soit figés et ne pouvant donc être modifiés soit fluides et, par conséquent, ouverts et dynamiques. Dans chaque cadre, des schémas temporels de dégel et de regel sont associés aux différents types de matériels utilisés. Cette étude laisse entendre que ces différents schémas ou rythmes de pratique visuelle sont importants dans l'évolution du savoir et dans la structuration des relations sociales à proposer. Donc, pour améliorer leurs performances, les praticiens devraient non seulement considérer le type de média qu'ils utilisent mais aussi réfléchir au rythme et au style de leurs interactions. Mots-clés: concept, savoir, apprentissage, objets, pratiques visuelles