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Technological Extinctions of Industrial Firms: An Inquiry into their ...

Technological Extinctions of Industrial Firms: An Inquiry into their ...

Ford’s methods (Colvin

Ford’s methods (Colvin [1915]). 12 20 What can we learn from the early process innovations at Ford and the subsequent process innovations in the 1920s and 1930s concerning the determinants of the shakeout in autos? Can the process innovations at Ford qualify as the triggering innovation in the innovative gamble theory? Together, the five key types of process innovations at Ford have many of the defining attributes of the triggering innovation. Their timing corresponds with the start of the shakeout. They collectively led to tremendous growth in labor productivity and brought about decreases in cost of immense competitive significance. Judging by the experience of Hudson, they were challenging to master. Finally, they no doubt increased the minimum efficient scale of operations, a requisite feature of the triggering innovation in the innovative gamble theory. On the negative side, however, the innovative gamble theory stresses the importance of a distinctive innovation based on developments outside the industry, yet the Ford system was based on an interrelated set of innovations developed by Ford with little outside influence. If one innovation had to be singled out, it would be the moving chassis assembly line, yet that came too late to trigger the shakeout. Indeed, it seems awkward to distinguish one particular innovation at Ford, for what emerged was truly a system composed of a number of innovations that evolved over a span of at least seven years beginning prior to the model T (Sorensen [1956, pp. 113-28], Nevins [1954, pp. 324-27, 349]). It is also awkward to speak about the Ford system as if process innovation did not subsequently continue in the industry. Both the Abernathy et al. series and the productivity measures suggest that process innovation remained at an extremely high rate through at least the middle 1920s if not beyond. Furthermore, the 1920s ushered in a new era of "flexible mass production" which required new production methods to avoid such debacles as Ford’s switchover from the Model T to the Model A (cf. Hounshell [1984, pp. 263-301]). Regarding the dominant design theory, we have already seen that the shakeout 12 Assembly lines at other firms, though, may not have fully embraced Fordist principles, particularly the centralized control of workers afforded by the assembly-line pacing of work (Raff [1991, pp. 727-31]).

21 preceded the development of a legitimate candidate for a dominant design by fifteen years. Perhaps more interesting is the great rise in process innovation and investment in new machinery and methods at Ford and elsewhere that occurred well before product innovation slowed significantly and equipment stabilized. Indeed, the start of process innovation at Ford even predated the Model T, and machine tools turned over at a rapid rate throughout the production of the Model T (Sorensen [1956, p. 123]), culminating in the $18 million cost of refurbishing and replacing machine tools when Ford switched from the Model T to the Model A in 1927 (Hounshell [1984, p. 288]). Ford’s success with the Model T drew heavily from his willingness to innovate on the process side even in the face of significant product innovation and rapid obsolescence of process investments. The success of other leading companies such as Buick, Studebaker, and Hudson also stemmed from their early commitment to process innovation. Indeed, companies that floundered in their management of the production process in the 1910s, such as Willys-Overland, squandered much of their early lead. Process innovation in general and at Ford in particular in the 1907-1914 period has all the earmarks of the increasing returns to R&D hypothesis. First, it involved a great amount of resources to pull off. For example, Nevins [1954, p. 504] described the large labor force at Ford devoted in 1914 to what he called creative preparations for mass production--fifty-nine men making drawings for machine tools and fixtures, forty making patterns for tools, and nearly five hundred at Highland Park and three-hundred in outside machine shops building machine tools. Four years earlier, Flanders noted how to be competitive, auto makers had to invest in experimental laboratories for analyzing and testing materials whose cost, "with its necessary adjunct, the machine shop for tool and jig making, would amount to more than the earlier makers had ever invested in factories." 13 The working out at Ford of the moving chassis assembly line alone involved eight months of no doubt costly experimentation. Second, the surge in process innovation occurred when the industry’s output started to grow rapidly and firms developed a much larger output over which they could reap the returns from process innovation. Ford epitomized the self-reinforcing process inherent in increasing returns 13 Quoted in Nevins [1954, p. 476].

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