Technology and the Canadian Forest-Product Industries ... - ArtSites

the concept of flexibility explicit in their investment plans, and toconsider a wider range of technological choices.A firm's "flexibility" is judged by how easily it adapts its geographicscope and strategy, internal structure, product design, productiontechniques, and design of industrial systems to changes, oranticipated changes, in market demands. Flexibility may be a characteristicof a specific mill or of the firm as a whole. Investment inin-house R&D is an attempt to promote the flexibility of the wholefirm. As corporate environments become more dynamic, firms need todevelop broadly based flexibility with more diverse products andproportionately more liquidity."How firms enhance their flexibility to meet changing marketneeds depends upon particular circumstances. During the 1950s and1960s several west coast firms improved flexibility by concentratinglumber, plywood, and pulp and paper operations on one site therebyproviding for easy diversion of raw materials from one end use toanother, as well as allowing for considerable cost savings, for example,in the use of energy. Those integrated facilities located on tide-wateralso enjoyed access to diverse markets and sources of timber.'? Othermore specialized factories may be able to sell to new geographicalmarkets and/or differentiate their product by introducing more versatiletechnology. Sawmills, for example, can potentially manufacturelumber, pulp chips, particleboard furnish, energy, specialty products(for example, sawdust for cattle feed) and thus generate multiple cashflows. If they are integrated with pulp and paper making processes aspart of forest-product complexes, they can bring together a variety ofengineering and technical skills and provide a focus for a variety ofinnovations.P Another way firms can achieve flexibility is byinvesting in specialty mills.'!For the firm, "horizontal and vertical" diversification into newproducts for existing markets and new products made with old equipmentextends the range of forest-products that can be manufacturedfrom a given resource base and increases flexibility by permittingcounter-cyclical revenue generation. If the opportunity costs of"related," if non-conventional, forest-products, such as chemicals andenergy, increase rapidly, firms will be tempted to invest in theseactivities. In this regard, the extent to which the firm can diversify itsuse of the forest resource is partly determined by its technologicalcapability. Similarly, such a strategy would exercise a firm's technologicalresources and in turn would enhance the range of potentiallyrelevant innovations available to the firm.How firms become flexible also depends on their size." Smallfirms can develop fast response to markets, high internal efficiency,and service to specialized market niches. In contrast, Canadian-based104