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NISTIR
6888 The Flow-Control Machining (FCM) Project is an ATP-funded research joint venture (RJV). Its partners are Extrude Hone Corporation (a small company in Irwin, PA, and inventor of the FCM technology), Ford Motor Company, General Motors, the University of Pittsburgh, and the University of Nebraska at Lincoln. The project resulted in the development of two finishing processes (the FCM technology) which increase the functional precision of cast-metal parts that carry fluids in interior passageways. Its first targeted application was increased airflow in automobile engines, analyzed in Estimated Economic Impacts of the Advanced Technology Program's Flow-Control Machining Project: Early Applications in the Automobile Industry (Ehlen 1999). This report develops a set of technology adoption indicators (TAIs) and uses them to select and analyze possible spillover applications of the FCM technology, originally developed for the automotive industry. To guide this and future case studies, a TAI-based methodology was developed that provides a structure for the analysis of the adoption of applications by an industry. Although used to study application adoption here, the TAI framework has other applications for ATP. First, it can be used to identify promising case studies for project evaluation. Second, it offers a consistent and effective methodology for conducting case studies. Third, it can assist in evaluating business plans of ATP proposers. Fourth, it can be used to advise ATP awardees on which industries are more likely potential adopters of their technologies. TAIs are defined based on the structure-conduct-performance (SCP) model widely used in economic analyses of industries (Scherer and Ross 1990). This model, supported by theoretical and empirical economic research, indicates that the structure of an industry affects its conduct and performance. For example, barriers to entry (structure) result in certain product-pricing behavior (conduct) that affects the ultimate efficiency and equity of the marketplace (performance). We used the SCP model to identify industry characteristics that are related to technology adoption and to organize those characteristics. After identifying industry characteristics that influence technology adoption, an exhaustive search was undertaken for measures of those characteristics. The measures that are presented in this report had to meet several criteria. Industry structure measures had to be quantitative, publicly available, comprehensive, theoretically related to the motivation to adopt technology, and have empirical evidence in the literature to support the connection to technology demand. By "comprehensive," we mean that there are individual measures for every industry, at a minimum, broadly defined at the 6-digit North American Industry Classification System (NAICS) or 4-digit Standard Industrial Classification (SIC) level. (Narrowly defined data can often be found for a precisely defined industry, but unlike the broadly defined data, it is not available for other industries at the same level of resolution.) Industry conduct measures in this report also had to meet the same criteria and had to be theoretically related to the opportunity to adopt technology. This report brings together the development of the TAI methodology with its application in a case study of the potential for adoption of the FCM technology for nonautomotive industries. The selection of the case study is described using the broadly defined TAI measures. Once the selection has been made, more detailed industry-specific information is developed to supplement the broadly defined data. Individual case studies require narrowly defined data unique to the industry of each case study. TAIs show that, of two preselected case study candidates, lawnmower manufacturers are more likely than aircraft manufacturers to adopt the flow-control machining technology spillover from the automotive industry. On the demand side, the broadly defined market concentration indicators show a preference for the home lawn and garden industry (which includes the lawnmower manufacturers) over the aircraft engine industry. Narrowly defined data show that, according to the four- and eight-firm concentration ratios, the lawnmower industry is too highly concentrated to adopt technology. However, the HHI supported technology adoption by the lawnmower industry. The broadly defined patent TAI supported the selection of either the lawnmower industry or the airplane engine industry. The broadly defined research joint venture TAI showed that while both industries formed a significant number of RJVs, the airplane engine industry was somewhat more likely to adopt technology. The narrowly defined TAI data on patents, public policy, and historical technology adoption show that EPA regulations are likely to encourage the lawnmower manufacturers to adopt new engine technology. Our analysis builds on the work and results described in a previous ATP report, Estimated Economic Impacts of the Advanced Technology Program's Flow-Control Machining Project: Early Applications in the Automobile Industry (Ehlen 1999). That earlier report presented a detailed analysis of the structure, conduct, and performance of the market for automobiles. Ehlen's analysis showed that, due to stringent government regulations on automobile fuel economy, the automobile industry is a likely adopter of new fuel efficiency technologies such as the ATP flow-control machining technology; even small, short-run applications of the technology to large automobiles could result in significant increases in automobile sales and employment. Ehlen's report, however, does not describe more generic metrics or approaches for estimating the likelihood of technology adoptions in other industries; nor does it address spillover applications outside the automotive industry. Section 2 of this report describes our examination of the business and economics literature and our selection of candidate measures of technology adoption. The measurement, data sources, and evaluation of each are explained. Section 3 describes the application of the broadly defined indicators developed in Section 2 to the case-study candidates. Additional, narrowly defined data unique to the selected case study industry are introduced using the TAI methodology under the same SCP framework. Section 4 first discusses the four market segments to which the FCM technology could apply and develops separate estimates of the costs of complying with a recent EPA regulation using conventional or FCM technology. Section 4 concludes by explaining the macroeconomic modeling and presenting the results of the economic impact analysis of implementing the FCM technology versus conventional means of achieving compliance with the regulation. Section 5 summarizes the report and provides a discussion of future directions for this research. Go to Section 2 or return to Table of Contents. Date created:
June 11, 2003 |
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