The future of manufacturing

Anyone who looks at the title of this special issue will agree that the intent behind the preparation of this volume was ambitious: to predict and discuss “The Future of Manufacturing”. Will manufacturing be important in the future? Even though some sceptics might say not, and put on the table some old familiar arguments, we would strongly disagree. To bring subsidies for the argument we issued the call-for-papers for this special issue of Journal of Manufacturing Technology Management, fully aware of the size of the challenge in our hands. But we strongly believed that the enterprise would be worthwhile. The point of departure is the ongoing debate concerning the meaning and content of manufacturing. The easily visualised internal activity of using tangible resources to make physical products in factories is no longer a viable way to characterise manufacturing. It is now a more loosely defined concept concerning the organisation and management of open, interdependent, systems for delivering goods and services, tangible and intangible, to diverse types of markets. Interestingly, Wickham Skinner is the most cited author in this special issue of JMTM. He provides the departure point of several articles because his vision and insights have guided and inspired researchers in production and operations management from the late 1960s until today. However, the picture that we draw after looking at the contributions in this special issue is intrinsically distinct, much more dynamic, and complex. Seven articles address the following research themes: 1.new patterns of organisation, where the boundaries of firms become blurred and the role of the firm in the production system as well as that of manufacturing within the firm become contingent; 2.new approaches to strategic decision-making in markets characterised by turbulence and weak signals at the customer interface; 3.new challenges in strategic and operational decisions due to changes in the profile of the workforce; 4.new global players, especially China, modifying the manufacturing landscape; and 5.new techniques, methods and tools that are being made feasible through progress in new technological domains. Of course, many other important dimensions could be studied, but these themes are representative of current changes and future challenges. Three articles look at the first theme: organisational evolution of production and operations in firms and networks. Karlsson's and Skold's article represent one further step in their efforts to characterise “the extraprise”. In the article, they advance the construction of a new framework, based on “the network perspective” by defining the formal elements which compose it and exploring the meaning of different types of relationships. The way in which “actors, resources and activities” are conceptualised extends the existing boundaries of analytical thinking in operations management and open new avenues for research, teaching and practice. The higher level of abstraction, an intrinsic feature of the framework, is associated to the increasing degree of complexity that characterises decisions related to strategy and implementation in the manufacturing and operations area, a feature that is expected to become more and more pervasive as time proceeds. Riis, Johansen, Englyst and Sorensen have also based their article on their previous work, which in this case is on “the interactive firm”. They advance new propositions on strategic roles of manufacturing and discuss why the configuration of strategic manufacturing roles, at the level of the network, will become a key issue and how the indirect strategic roles of manufacturing will become increasingly important. Additionally, by considering that value chains will become value webs, they predict that shifts in strategic manufacturing roles will look like a sequence of moves similar to a game of chess. Then, lastly under the first theme, Fleury and Fleury develop a conceptual framework for the study of production systems in general derived from field research in the telecommunications industry, here considered a prototype of the coming information society and knowledge economy. They propose a new typology of firms which, on certain dimensions, complements the propositions found in the other two articles. Their telecoms-based framework (TbF) comprises six types of companies characterised by distinct profiles of organisational competences, which interact according to specific patterns of relationships, thus creating distinct configurations of production networks. The second theme is addressed by Kyläheiko and SandstroÍm in their article “Strategic options based framework for management of dynamic capabilities in manufacturing firms”. They propose a new approach to strategic decision-making in markets characterised by turbulence and weak signals at the customer interface. Their framework for a manufacturing firm in the digital age leads to active asset selection (strategic investments in both tangible and intangible assets) and efficient orchestrating of the global value net in “thin” intangible asset markets. The framework consists of five steps based on Porter's five-forces model, the resources-based view, complemented by means of the concepts of strategic options and related flexibility issues. Thun, GroÍssler and Miczka's contribution to the third theme brings the human dimension to the debate regarding the future of manufacturing. Their article focuses on the challenges brought to management by the ageing of workers in Germany but, in the arguments that are raised, the future challenges associated to workers and work organisation in every production system become visible and relevant. An interesting point in the approach adopted by the authors is that not only the factual problems and solutions are taken into account but the perception of the managers is brought into the picture. China cannot be absent in the discussion of the future of manufacturing. Therefore, within the fourth theme, Vaidya, Bennett and Liu provide the evidence of the gradual improvement of Chinese companies in the medium and high-tech sectors, by using the revealed comparative advantage (RCA) analysis. The Chinese evolution is shown to be based on capabilities developed through combining international technology transfer and indigenous learning. The main implication for the Western companies is the need to take account of the accelerated rhythm of capability development in China. For other developing countries China's case provides lessons of great importance. Finally, under the fifth theme, Kuehnle's article: “Post mass production paradigm (PMPP) trajectories” provides a futuristic scenario of what is already around us and might become prevalent in the future. It takes a very intensive look at a whole set of dimensions that are affecting manufacturing now, and will influence manufacturing in the future, ranging from the application of ICT to the need for social transparency. In summary, this special issue of JMTM presents a brief, but undisputable, demonstration of the possible richness of manufacturing in the future. Indeed, we could even say that manufacturing has no future if we only stick to the past perspectives. Embracing the new is not easy. The new configurations of production systems, the distributed and complementary roles to be performed by distinct types of companies in diversified networked structures, leveraged by the new emergent technologies and associated the new challenges for managing people, are all themes that are carriers of the future. The Guest Editors of this special issue on the future of manufacturing are strongly convinced that their undertaking has been worthwhile.

Trade liberalization and the efficiency of firms in Indian manufacturing

Has the efficiency of firms in India improved since its liberalization in 1991? The authors attempt to answer this question by analyzing the determinants of firm-level efficiency in six manufacturing sectors in India while focusing on the effects of liberalization and domestic competition. They find that there was an increase in overall efficiency in the post-reform period in India in five out of six sectors. While imports do not seem to improve efficiency, liberalization did increase efficiency in four of the sectors.

Does the Chinese banking system promote the growth of firms?

Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China's industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results.

The boundaries of reporting sustainable development in social housing

The Registered Social Landlord (an independent housing association in the UK) examined here was widely recognized as providing an example of good governance. The organization was using extensive internal reporting, both corporate and quasi-governmental in language, to try to accurately capture different aspects of performance. This article reveals that reporting sustainable development has boundaries to be overcome, particularly in measuring performance of environmental and community activities. © 2008 The Authors.

The determinants of firms' performance:can finance constraints improve technical efficiency?

This paper analyses the mechanisms through which binding finance constraints can induce debt-constrained firms to improve technical efficiency to guarantee positive profits. This hypothesis is tested on a sample of firms belonging to the Italian manufacturing. Technical efficiency scores are computed by estimating parametric production frontiers using the one stage approach as in Battese and Coelli [Battese, G., Coelli, T., 1995. A model for technical efficiency effects in a stochastic frontier production function for panel data. Empirical Economics 20, 325-332]. The results support the hypothesis that a restriction in the availability of financial resources can affect positively efficiency. © 2004 Elsevier B.V. All rights reserved.

The carbon dioxide emissions of firms:a spatial analysis

In order to gain a greater understanding of firms' 'environmental behaviour' this paper explores the factors that influence firms' emissions intensities and provides the first analysis of the determinants of firm level carbon dioxide (CO2) emissions. Focussing on Japan, the paper also examines whether firms' CO2 emissions are influenced by the emissions of neighbouring firms and other possible sources of spatial correlation. Results suggest that size, the capital-labour ratio, R&D expenditure, the extent of exports and concern for public profile are the key determinants of CO2 emissions. Local lobbying pressure, as captured by regional community characteristics, does not appear to play a role, however emissions are found to be spatially correlated. This raises implications for the manner in which the environmental performance of firms is modelled in future. © 2013 Elsevier Inc.

Does the Chinese banking system promote the growth of firms?

Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China’s industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results.

Corporate governance, managers' independence, exporting, and performance of firms in transition economies

Using data on 157 large companies in Poland and Hungary, this paper employs Bayesian structural equation modeling to examine the relations among corporate governance, managers' independence from owners in terms of strategic decision making, exporting, and performance. Managers' independence is positively associated with firms' financial performance and exporting. In turn, the extent of managers' independence is negatively associated with ownership concentration, but positively associated with the percentage of foreign directors on the firm's board. We interpret these results as indicating that concentrated owners tend to constrain managerial autonomy at the cost of the firm's internationalization and performance, but board participation of foreign stakeholders enhances the firm's export orientation and performance by encouraging executives' decision-making autonomy.

Corporate governance, managers' independence, exporting and performance of firms in transition economies

Using data on 157 large companies in Poland and Hungary this paper employs Bayesian structural equation modeling to examine interrelationships between corporate governance, managers' independence from owners in terms of strategic decision-making, exporting and performance. It is found that managers' independence is positively associated with firms' financial performance and exporting. In turn, the extent of managers' independence is contingent on the firm's corporate governance parameters: it is negatively associated with ownership concentration, but positively associated with the percentage of foreign directors on the firm's board. We interpret these results as an indication that (i) risk averse, concentrated owners tend to constrain managerial autonomy at the cost of the firm's internationalization and performance, (ii) board participation of foreign stakeholders, on the other hand, enhances the firm's export orientation and performance by encouraging executives' decision-making autonomy.

Earnings behaviour of financially distressed firms:The role of institutional ownership

Using a sample of 859 U.S. bankruptcy-filing firms over the period 1986-2004, we examine the earnings behaviour of managers during the distressed period by looking at sources of abnormal accruals prior to the bankruptcy-filing year. Results show that managers of highly distressed firms shift earnings downwards prior to the bankruptcy filing. We test and provide evidence in support of two potential contributing factors. First, top-level management turnover among distressed firms leads new managers to earnings bath choices during the distressed period. Second, qualified audit opinions exert pressure on managers to follow more conservative earnings behaviour during the distressed period. Evidence is also provided that the management of distressed firms with lower (higher) institutional ownership has greater (lesser) tendency to manage earnings downwards. Results also show that higher institutional ownership mitigates the negative abnormal returns of firms with top management turnover. To the authors' knowledge, this is the first study that attempts to examine whether institutional ownership relates to market reaction in conjunction with a top management turnover or a qualified audit opinion during the distressed period. Prior studies focused on the investigation of earnings management or institutional ownership (separately) during the distressed period, but did not examine if the effect of institutional ownership on earnings behaviour also influences subsequent returns. Thus, the results of this study should be of interest to analysts, standard setters and regulatory bodies since our results show that management turnover, qualified audit opinions and firm governance mechanisms affect the quality of earnings and the level of abnormal returns. © 2007 Accounting Foundation, The University of Sydney.

On the opportunism-independent theory of the firm

Previous developments in the opportunism-independent theory of the firm are either restricted to special cases or are derived from the capabilities or resource-based perspective. However, a more general opportunism-independent approach can be developed, based on the work of Demsetz and Coase, which is nevertheless contractual in nature. This depends on 'direction', that is, deriving economic value by permitting one set of actors to direct the activities of another, and of non-human factors of production. Direction helps to explain not only firm boundaries and organisation, but also the existence of firms, without appealing to opportunism or moral hazard. The paper also considers the extent to which it is meaningful to speak of 'contractual' theories in the absence of opportunism, and whether this analysis can be extended beyond the employment contract to encompass ownership of assets by the firm. © The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Analysis of productivity differences among foreign and domestic firms:evidence from Germany

This paper presents differences in firm-level total factor productivity (TFP) across 22 manufacturing and 17 service industries in Germany over the period 1995–2004. It is an attempt to study whether and to what extent foreign multinational enterprises (MNEs) are more productive relative to German firms. As well as distinguishing between foreign and domestic firms, we also distinguish between German MNEs and domestic firms that do not have any foreign presence. Controlling for endogeneity through semi-parametric techniques, our findings indicate considerable heterogeneity in firm performance across types of firms. The foreign/domestic distinction is not as clear cut as has been suggested elsewhere; multinationality is important in explaining productivity differences rather than foreignness.