Pharmaceutical Generics, Vertical Product Differentiation, and Public Policy

This paper studies oligopolistic competition in off-patent pharmaceutical markets using a vertical product differentiation model. This model can explain the observation that countries with stronger regulations have smaller generic market shares. It can also explain the differences in observed regulatory regimes. Stronger regulation may be due to a higher proportion of production that is done by foreign firms. Finally, a closely related model can account for the observed increase in prices by patent owners after entry of generic producers.

Financial Markets and Real Ecinomy: Four Essays in International Trade

Financial markets play an important role in an economy performing various functions like mobilizing and pooling savings, producing information about investment opportunities, screening and monitoring investments, implementation of corporate governance, diversification and management of risk. These functions influence saving rates, investment decisions, technological innovation and, therefore, have important implications for welfare. In my PhD dissertation I examine the interplay of financial and product markets by looking at different channels through which financial markets may influence an economy.My dissertation consists of four chapters. The first chapter is a co-authored work with Martin Strieborny, a PhD student from the University of Lausanne. The second chapter is a co-authored work with Melise Jaud, a PhD student from the Paris School of Economics. The third chapter is co-authored with both Melise Jaud and Martin Strieborny. The last chapter of my PhD dissertation is a single author paper.Chapter 1 of my PhD thesis analyzes the effect of financial development on growth of contract intensive industries. These industries intensively use intermediate inputs that neither can be sold on organized exchange, nor are reference-priced (Levchenko, 2007; Nunn, 2007). A typical example of a contract intensive industry would be an industry where an upstream supplier has to make investments in order to customize a product for needs of a downstream buyer. After the investment is made and the product is adjusted, the buyer may refuse to meet a commitment and trigger ex post renegotiation. Since the product is customized to the buyer's needs, the supplier cannot sell the product to a different buyer at the original price. This is referred in the literature as the holdup problem. As a consequence, the individually rational suppliers will underinvest into relationship-specific assets, hurting the downstream firms with negative consequences for aggregate growth. The standard way to mitigate the hold up problem is to write a binding contract and to rely on the legal enforcement by the state. However, even the most effective contract enforcement might fail to protect the supplier in tough times when the buyer lacks a reliable source of external financing. This suggests the potential role of financial intermediaries, banks in particular, in mitigating the incomplete contract problem. First, financial products like letters of credit and letters of guarantee can substantially decrease a risk and transaction costs of parties. Second, a bank loan can serve as a signal about a buyer's true financial situation, an upstream firm will be more willing undertake relationship-specific investment knowing that the business partner is creditworthy and will abstain from myopic behavior (Fama, 1985; von Thadden, 1995). Therefore, a well-developed financial (especially banking) system should disproportionately benefit contract intensive industries.The empirical test confirms this hypothesis. Indeed, contract intensive industries seem to grow faster in countries with a well developed financial system. Furthermore, this effect comes from a more developed banking sector rather than from a deeper stock market. These results are reaffirmed examining the effect of US bank deregulation on the growth of contract intensive industries in different states. Beyond an overall pro-growth effect, the bank deregulation seems to disproportionately benefit the industries requiring relationship-specific investments from their suppliers.Chapter 2 of my PhD focuses on the role of the financial sector in promoting exports of developing countries. In particular, it investigates how credit constraints affect the ability of firms operating in agri-food sectors of developing countries to keep exporting to foreign markets.Trade in high-value agri-food products from developing countries has expanded enormously over the last two decades offering opportunities for development. However, trade in agri-food is governed by a growing array of standards. Sanitary and Phytosanitary standards (SPS) and technical regulations impose additional sunk, fixed and operating costs along the firms' export life. Such costs may be detrimental to firms' survival, "pricing out" producers that cannot comply. The existence of these costs suggests a potential role of credit constraints in shaping the duration of trade relationships on foreign markets. A well-developed financial system provides the funds to exporters necessary to adjust production processes in order to meet quality and quantity requirements in foreign markets and to maintain long-standing trade relationships. The products with higher needs for financing should benefit the most from a well functioning financial system. This differential effect calls for a difference-in-difference approach initially proposed by Rajan and Zingales (1998). As a proxy for demand for financing of agri-food products, the sanitary risk index developed by Jaud et al. (2009) is used. The empirical literature on standards and norms show high costs of compliance, both variable and fixed, for high-value food products (Garcia-Martinez and Poole, 2004; Maskus et al., 2005). The sanitary risk index reflects the propensity of products to fail health and safety controls on the European Union (EU) market. Given the high costs of compliance, the sanitary risk index captures the demand for external financing to comply with such regulations.The prediction is empirically tested examining the export survival of different agri-food products from firms operating in Ghana, Mali, Malawi, Senegal and Tanzania. The results suggest that agri-food products that require more financing to keep up with food safety regulation of the destination market, indeed sustain longer in foreign market, when they are exported from countries with better developed financial markets.Chapter 3 analyzes the link between financial markets and efficiency of resource allocation in an economy. Producing and exporting products inconsistent with a country's factor endowments constitutes a serious misallocation of funds, which undermines competitiveness of the economy and inhibits its long term growth. In this chapter, inefficient exporting patterns are analyzed through the lens of the agency theories from the corporate finance literature. Managers may pursue projects with negative net present values because their perquisites or even their job might depend on them. Exporting activities are particularly prone to this problem. Business related to foreign markets involves both high levels of additional spending and strong incentives for managers to overinvest. Rational managers might have incentives to push for exports that use country's scarce factors which is suboptimal from a social point of view. Export subsidies might further skew the incentives towards inefficient exporting. Management can divert the export subsidies into investments promoting inefficient exporting.Corporate finance literature stresses the disciplining role of outside debt in counteracting the internal pressures to divert such "free cash flow" into unprofitable investments. Managers can lose both their reputation and the control of "their" firm if the unpaid external debt triggers a bankruptcy procedure. The threat of possible failure to satisfy debt service payments pushes the managers toward an efficient use of available resources (Jensen, 1986; Stulz, 1990; Hart and Moore, 1995). The main sources of debt financing in the most countries are banks. The disciplining role of banks might be especially important in the countries suffering from insufficient judicial quality. Banks, in pursuing their rights, rely on comparatively simple legal interventions that can be implemented even by mediocre courts. In addition to their disciplining role, banks can promote efficient exporting patterns in a more direct way by relaxing credit constraints of producers, through screening, identifying and investing in the most profitable investment projects. Therefore, a well-developed domestic financial system, and particular banking system, would help to push a country's exports towards products congruent with its comparative advantage.This prediction is tested looking at the survival of different product categories exported to US market. Products are identified according to the Euclidian distance between their revealed factor intensity and the country's factor endowments. The results suggest that products suffering from a comparative disadvantage (labour-intensive products from capital-abundant countries) survive less on the competitive US market. This pattern is stronger if the exporting country has a well-developed banking system. Thus, a strong banking sector promotes exports consistent with a country comparative advantage.Chapter 4 of my PhD thesis further examines the role of financial markets in fostering efficient resource allocation in an economy. In particular, the allocative efficiency hypothesis is investigated in the context of equity market liberalization.Many empirical studies document a positive and significant effect of financial liberalization on growth (Levchenko et al. 2009; Quinn and Toyoda 2009; Bekaert et al., 2005). However, the decrease in the cost of capital and the associated growth in investment appears rather modest in comparison to the large GDP growth effect (Bekaert and Harvey, 2005; Henry, 2000, 2003). Therefore, financial liberalization may have a positive impact on growth through its effect on the allocation of funds across firms and sectors.Free access to international capital markets allows the largest and most profitable domestic firms to borrow funds in foreign markets (Rajan and Zingales, 2003). As domestic banks loose some of their best clients, they reoptimize their lending practices seeking new clients among small and younger industrial firms. These firms are likely to be more risky than large and established companies. Screening of customers becomes prevalent as the return to screening rises. Banks, ceteris paribus, tend to focus on firms operating in comparative-advantage sectors because they are better risks. Firms in comparative-disadvantage sectors finding it harder to finance their entry into or survival in export markets either exit or refrain from entering export markets. On aggregate, one should therefore expect to see less entry, more exit, and shorter survival on export markets in those sectors after financial liberalization.The paper investigates the effect of financial liberalization on a country's export pattern by comparing the dynamics of entry and exit of different products in a country export portfolio before and after financial liberalization.The results suggest that products that lie far from the country's comparative advantage set tend to disappear relatively faster from the country's export portfolio following the liberalization of financial markets. In other words, financial liberalization tends to rebalance the composition of a country's export portfolio towards the products that intensively use the economy's abundant factors.

Intra-Industry Trade, Multilateral Trade Integration, and Invasive Species Risk, December 2006

We analyze the linkage between protectionism and invasive species (IS) hazard in the context of two-way trade and multilateral trade integration, two major features of real-world agricultural trade. Multilateral integration includes the joint reduction of tariffs and trade costs among trading partners. Multilateral trade integration is more likely to increase damages from IS than predicted by unilateral trade opening under the classic Heckscher-Ohlin-Samuelson (HOS) framework because domestic production (the base susceptible to damages) is likely to increase with expanding export markets. A country integrating its trade with a partner characterized by relatively higher tariff and trade costs is also more likely to experience increased IS damages via expanded domestic production for the same reason. We illustrate our analytical results with a stylized model of the world wheat market.

Globalization and the provision of incentives inside the firm: The effect of foreign competition

This paper studies the effect of changes in foreign competition on the structureof compensation and incentives of U.S. executives. We measure foreign competitionas import penetration and use tariffs and exchange rates as instrumental variables toestimate its causal effect on pay. We find that higher foreign competition leads tomore incentive provision in a variety of ways. First, it increases the sensitivity of payto performance. Second, it increases whithin-firm pay differentials between executivelevels, with CEOs typically experiencing the largest wage increases, partly becausethey receive the steepest incentive contracts. Finally, higher foreign competition is alsoassociated with a higher demand for talent. These results indicate that increased foreigncompetition can explain some of the recent trends in compensation structures.

Does foreign direct investment crowd out domestic entrepreneurship?

In analyzing firm entry and exit across Belgian manufacturing industries,this paper presents evidence that import competition and foreign directinvestment discourage entry and stimulate exit of domestic entrepreneurs.These results are in line with theoretical occupational choice modelsthat predict foreign direct investment would crowd out domesticentrepreneurs through their selections in product and labor markets.However, the empirical results also suggest that this crowding out effectmay be moderated or even reversed in the long-run due to the long termpositive effects of FDI on domestic entrpreneurship as a result oflearning, demonstration, networking and linkage effects between foreignand domestic firms.

Nationalisme économique et réalisme mercantile : la politique énergétique russe sous Poutine (2000-2008)

Mon travail met en évidence la restructuration de l'industrie énergétique russe sous les deux mandats Poutine (2000-2008) via le rôle prédominant de l'État dans une perspective historique. Une nouvelle élite politique russe (les Silovikis) issue des structures de force de l'Etat favorise le nationalisme économique axé sur le rétablissement de l'autorité du gouvernement central au sein de l'industrie énergétique nationale au détriment des pouvoirs régionaux, des sociétés privées étrangères et des oligarques indépendants. Dans cette perspective, on peut citer "l'affaire Youkos" en 2003 caractérisée par l'arrestation de l'oligarque Mikhaïl Khodorkhovsky; les tentatives silovikiennes de reprendre l'ascendant sur les compagnies pétrolières régionales Tatneft et Bachneft gérées par les gouvernements tatar et bachkir, la pression fiscale envers les majors pétrolières étrangères à l'instar du conflit russo- britannique relatif à la joint-venture TNK-BP. Quant à la politique énergétique étrangère russe, elle est inspirée par line vision réaliste mercantile; le gouvernement silovikien vise à défendre l'intérêt national, le prestige et la puissance de la Russie via ses "champions" énergétiques Rosneft et Gazprom utilisés comme levier politique, notamment à l'égard des pays de la CEI considéré par Moscou comme sa sphère d'influence historique. Dans cette perspective, nous pouvons mentionner l'interruption des approvisionnements pétroliers et gaziers russes à l'Ukraine, aux Etats baltes ou encore à la Géorgie; la concurrence entre les majors russes et étrangères en Asie centrale / Caucase pour les champs pétrolifères et les tracés de pipelines (nouveau «Grand Jeu»); la diversification des marchés russes à l'exportation à travers la promotion de nouveaux pipelines partant des champs pétrolifères sibériens vers la Chine et l'océan Pacifique.¦My work highlights the restructuration of the Russian energy industry under the 2 Putin madates (2000-2008) by the predominant role of the state in a historical perspective. A new Russian politic elite (Siloviki) from state structure forces promotes the economic nationalism focused on the reestablishment of the central governmental authority in the national energy industry against regional powers, private foreign companies and independent oligarchs. In this perspective, we can mention the "Yukos Affair" in 2003 with the arrest of the oligarch Mikhail Khodorkhovsky; the silovikian attempts to take over the regional oil companies Tatneft and Bachneft handled by the Tatar and Bashkir governments; the fiscal silovikian pressure against foreign companies such as the Russo-Britannic joint- venture TNK-BP. As for the Russian energy Foreign policy, it is inspired by a mercantile realism vision; the silovikian government aims to defend the national interest, the prestige and the power of Russia through its energy companies Rosneft and Gazprom as a political leverage especially toward the CEI Countries considered by Moscow as it historical sphere of influence. In this perspective, we can mention the interruption of Russian oil&gas supply toward Ukraine, Baltic states or Georgia; the competition between Russian and foreign companies in Central Asia/Caucasus for oil and gas fields and pipeline routes (new "Great Game"); the diversification of Russian export markets through the promotion ο new pipelines from Siberian oil&gas fields to China and the Pacific Ocean.

Pharmaceutical generics, vertical product differentiation and public policy

This paper studies oligopolistic competition in off-patent pharmaceuticalmarkets using a vertical product differentiation model. This model canexplain the observation that countries with stronger regulations havesmaller generic market shares. It can also explain the differences inobserved regulatory regimes. Stronger regulation may be due to a higherproportion of production that is done by foreign firms. Finally, a closelyrelated model can account for the observed increase in prices by patentowners after entry of generic producers.

How competition controls team production: The case of fishing firms

Under team production, those who monitor individual productivity areusually the only ones compensated with a residual that varies withthe performance of the team. This pattern is efficient, as is shownby the prevalence of conventional firms, except for small teams andwhen specialized monitoring is ineffective. Profit sharing in repeatedteam production induces all team members to take disciplinary actionagainst underperformers through switching and separation decisions,however. Such action provides effective self-enforcemnt when themarkets for team members are competitive, even for large teams usingspecialized monitoring. The traditional share system of fishing firmsshows that for this competition to provide powerful enough incentivesthe costs of switching teams and measuring team productivity must bebellow. Risk allocation may constrain the organizational designdefined by the use of a share system. It does not account for itsexistence, however.

Production Flow Analysis - cases from manufacturing and service industry

Production flow analysis (PFA) is a well-established methodology used for transforming traditional functional layout into product-oriented layout. The method uses part routings to find natural clusters of workstations forming production cells able to complete parts and components swiftly with simplified material flow. Once implemented, the scheduling system is based on period batch control aiming to establish fixed planning, production and delivery cycles for the whole production unit. PFA is traditionally applied to job-shops with functional layouts, and after reorganization within groups lead times reduce, quality improves and motivation among personnel improves. Several papers have documented this, yet no research has studied its application to service operations management. This paper aims to show that PFA can well be applied not only to job-shop and assembly operations, but also to back-office and service processes with real cases. The cases clearly show that PFA reduces non-value adding operations, introduces flow by evening out bottlenecks and diminishes process variability, all of which contribute to efficient operations management.

Three essays on major trends in a slow clockspeed industry : the case of industrial automation

The motivation for this research initiated from the abrupt rise and fall of minicomputers which were initially used both for industrial automation and business applications due to their significantly lower cost than their predecessors, the mainframes. Later industrial automation developed its own vertically integrated hardware and software to address the application needs of uninterrupted operations, real-time control and resilience to harsh environmental conditions. This has led to the creation of an independent industry, namely industrial automation used in PLC, DCS, SCADA and robot control systems. This industry employs today over 200'000 people in a profitable slow clockspeed context in contrast to the two mainstream computing industries of information technology (IT) focused on business applications and telecommunications focused on communications networks and hand-held devices. Already in 1990s it was foreseen that IT and communication would merge into one Information and communication industry (ICT). The fundamental question of the thesis is: Could industrial automation leverage a common technology platform with the newly formed ICT industry? Computer systems dominated by complex instruction set computers (CISC) were challenged during 1990s with higher performance reduced instruction set computers (RISC). RISC started to evolve parallel to the constant advancement of Moore's law. These developments created the high performance and low energy consumption System-on-Chip architecture (SoC). Unlike to the CISC processors RISC processor architecture is a separate industry from the RISC chip manufacturing industry. It also has several hardware independent software platforms consisting of integrated operating system, development environment, user interface and application market which enables customers to have more choices due to hardware independent real time capable software applications. An architecture disruption merged and the smartphone and tablet market were formed with new rules and new key players in the ICT industry. Today there are more RISC computer systems running Linux (or other Unix variants) than any other computer system. The astonishing rise of SoC based technologies and related software platforms in smartphones created in unit terms the largest installed base ever seen in the history of computers and is now being further extended by tablets. An underlying additional element of this transition is the increasing role of open source technologies both in software and hardware. This has driven the microprocessor based personal computer industry with few dominating closed operating system platforms into a steep decline. A significant factor in this process has been the separation of processor architecture and processor chip production and operating systems and application development platforms merger into integrated software platforms with proprietary application markets. Furthermore the pay-by-click marketing has changed the way applications development is compensated: Three essays on major trends in a slow clockspeed industry: The case of industrial automation 2014 freeware, ad based or licensed - all at a lower price and used by a wider customer base than ever before. Moreover, the concept of software maintenance contract is very remote in the app world. However, as a slow clockspeed industry, industrial automation has remained intact during the disruptions based on SoC and related software platforms in the ICT industries. Industrial automation incumbents continue to supply systems based on vertically integrated systems consisting of proprietary software and proprietary mainly microprocessor based hardware. They enjoy admirable profitability levels on a very narrow customer base due to strong technology-enabled customer lock-in and customers' high risk leverage as their production is dependent on fault-free operation of the industrial automation systems. When will this balance of power be disrupted? The thesis suggests how industrial automation could join the mainstream ICT industry and create an information, communication and automation (ICAT) industry. Lately the Internet of Things (loT) and weightless networks, a new standard leveraging frequency channels earlier occupied by TV broadcasting, have gradually started to change the rigid world of Machine to Machine (M2M) interaction. It is foreseeable that enough momentum will be created that the industrial automation market will in due course face an architecture disruption empowered by these new trends. This thesis examines the current state of industrial automation subject to the competition between the incumbents firstly through a research on cost competitiveness efforts in captive outsourcing of engineering, research and development and secondly researching process re- engineering in the case of complex system global software support. Thirdly we investigate the industry actors', namely customers, incumbents and newcomers, views on the future direction of industrial automation and conclude with our assessments of the possible routes industrial automation could advance taking into account the looming rise of the Internet of Things (loT) and weightless networks. Industrial automation is an industry dominated by a handful of global players each of them focusing on maintaining their own proprietary solutions. The rise of de facto standards like IBM PC, Unix and Linux and SoC leveraged by IBM, Compaq, Dell, HP, ARM, Apple, Google, Samsung and others have created new markets of personal computers, smartphone and tablets and will eventually also impact industrial automation through game changing commoditization and related control point and business model changes. This trend will inevitably continue, but the transition to a commoditized industrial automation will not happen in the near future.

Logistics Management in China's Development Zones - Finnish Metal Industry Perspective

Alikehittynyt infrastruktuuri, tiukat säädökset ja säädösten tulkitseminen, sekä monimutkaiset verotuskäytännöt ovat aiheuttaneet ongelmia suomalaisille Alikehittynyt infrastruktuuri, tiukat säädökset ja säädösten tulkitseminen, sekä monimutkaiset verotuskäytännöt ovat aiheuttaneet ongelmia suomalaisille yrityksille Kiinassa. Tutkimuksen perusteella yritykset eivät pysty vaikuttamaan infrastruktuurin kehittymiseen tai säädösten implementointiin, mutta ylläpitämällä suhteita ja valitsemalla oikeat partnerit yritykset pystyvät hallitsemaan ongelma-alueitaan. Etenkin ulkomaalaisille yrityksille oikean logistiikkaoperaattorin valinta on tärkeätä ja huomioon ottaen palvelutason, kulttuuritaustan sekä kansainväliset operaatiot on ulkomaalaisten yritysten tehokkaampaa käyttää kansainvälisiä operaattoreita kuin paikallisia toimijoita, jotkaovat usein halvempia, mutta eivät pysty toimimaan kansainvälisellä tasolla. Vientiin keskittyneiden yritysten tulisi sijoittua vapaakauppa-alueille tai vientiin painottuneille teollisuusalueille. Kyseisillä alueilla liiketoiminta mannermaahan on rajoitettu, eivätkä alueet täten sovellu yrityksille, jotka ovat keskittyneet Kiinan markkinoille. Paikallisesti operoivien yritysten tulisi sijoittua normaaleihin teollisuuspuistoihin ja käyttää tullin valvomia varastoja tukemaan kansainvälisiä toimintojaan.Tulisi myös muistaa etteivät kiinalaiset teollisuuspuistot täytä kansainvälisiä kriteerejä, joten säädöksiin on tärkeätä tutustua huolella jamielipiteitä kerätä toisilta yrityksiltä. Kiinassa merkittävimmät logistiikkaongelmat ilmenevät tuonnin ja viennin yhteydessä, jolloin säädökset ja toimintamallit ovat kontrolloidumpia. Etenkin tullaus- ja arvonlisävero ongelmat liittyvät kiinteästi tuonti- ja vientiprosessiin. Tutkimuksen tulokset osoittivat, että tullausprosessi tehostuu yhteistyön ja koulutuksen kautta, mutta arvonlisäverosta aiheutuvien kustannusten minimointi vaatii logistiikkapuistojen käyttöä. Mikäli asiakas haluaa tehdä tullauksen kotiprovinssissaan tai yritys tekee kauppaa ALV -vapautettujen yritysten kanssa, tulisi logistiikkapuistojen käyttöä lisätä. Käytettäessä logistiikkapuistoja yritykset välttävät tuotteiden kuljetukset Hongkongiin jatakaisin säästäen huomattavasti kustannuksissa ja toimitusajoissa. Logistiikkapuistoja on myös mahdollista käyttää ratkaisuna kasvaviin ja viivästyviin ALV palautuksiin. Tutkimuksen tulosten mukaan toimintaympäristö ja vientipainotteinen valmistus ohjaavat 3PL yritysten valintaa ja vaihtoehtoisten logistiikkapalvelujen implementointia. Etabloiduttaessavapaakauppa-alueille vientiin ja tuontiin liittyvät ongelmatekijät vahvistuvat sekä rajoitukset kiinan liiketoimintaan kasvavat, mikä tekee yhteistyönkansainvälisten logistiikkaoperaattoreiden kanssa välttämättömäksi ja kannustaa hyödyntämään logistiikkapuistoja.

Carbon and nitrogen cycling in an integrated soybean-beef cattle production system under different grazing intensities

Abstract:The objective of this work was to evaluate the effect of grazing intensity on the decomposition of cover crop pasture, dung, and soybean residues, as well as the C and N release rates from these residues in a long-term integrated soybean-beef cattle system under no-tillage. The experiment was initiated in 2001, with soybean cultivated in summer and black oat + Italian ryegrass in winter. The treatments consisted of four sward heights (10, 20, 30, and 40 cm), plus an ungrazed area, as the control. In 2009-2011, residues from pasture, dung, and soybean stems and leaves were placed in nylon-mesh litter bags and allowed to decompose for up to 258 days. With increasing grazing intensity, residual dry matter of the pasture decreased and that of dung increased. Pasture and dung lignin concentrations and C release rates were lower with moderate grazing intensity. C and N release rates from soybean residues are not affected by grazing intensity. The moderate grazing intensity produces higher quality residues, both for pasture and dung. Total C and N release is influenced by the greater residual dry matter produced when pastures were either lightly grazed or ungrazed.

International comparison of Russian food processing industry -Finnish perspective

Työn päätavoitteena on kartoittaa Venäjän elintarviketeollisuutta ulkomaisen investoijan näkökulmasta. Tutkimus arvioi liiketoimintamahdollisuuksia ja kilpailutilannetta Venäjän elintarviketeollisuudessa ja auttaa ulkomaisia yrityksiä toteuttamaan liiketoimintastrategioitaan Venäjällä. Venäjän ja muiden siirtymätalousmaiden markkinatilannevertailujen lisäksi Venäjän alueita verrataan keskenään. Myös mahdollisen WTO jäsenyyden vaikutuksia arvioidaan. Kommunismin perintö vaikuttaa edelleen Venäjän elintarviketeollisuuteen ja maatalouteen. Maatalouden tuottavuus on kaukana länsimaisesta tasosta ja maatiloilta puuttuu rahoitusta. Etenkin maidon- ja lihanjalostajat kärsivät raaka-ainepulasta. Venäjän kriisi vuonna 1998 vahvisti paikallista teollisuustuotantoa mutta aiheutti ongelmia ulkomaisille investoijille ja yrityksille, jotka vievät tuotteitaan Venäjälle. Edut, joita mahdollinen maailmankauppajärjestö WTO:n jäsenyys tuo, ovat merkittävämpiä Venäjälle kuin sen kauppakumppaneille. Venäjän alueet eivät ole yhtäläisesti kehittyneitä ja kuluttajien ostovoima vaihtelee paljon. Itsestään selvin ja houkuttelevin vaihtoehto menestyvien elintarvikeyritysten laajentumiselle löytyy alueilta, joilla ostovoima on suurin. Tähän asti kansainväliset elintarvikeyritykset ovat olleet enemmän kiinnostuneita Itä- ja Keski-Euroopan maista. Käytettävissä olevat tulot ovat Itä- ja Keski-Euroopan maissa suurempia kuin Venäjällä, joten tuottajat pystyvät myymään myös kalliimpia tuotteita. Työvoimakustannukset Venäjällä tulevat olemaan suotuisia vielä muutaman vuosikymmenen ja markkinoiden koko on merkittävä. Siksi kansainvälisillä elintarvikeyrityksillä riittää kiinnostusta tulevaisuudessa investoida myös Venäjälle.

Origins of production errors and significance of employee empowerment in reducing production error amount in sheet metal fabricating industry

The market place of the twenty-first century will demand that manufacturing assumes a crucial role in a new competitive field. Two potential resources in the area of manufacturing are advanced manufacturing technology (AMT) and empowered employees. Surveys in Finland have shown the need to invest in the new AMT in the Finnish sheet metal industry in the 1990's. In this run the focus has been on hard technology and less attention is paid to the utilization of human resources. In manymanufacturing companies an appreciable portion of the profit within reach is wasted due to poor quality of planning and workmanship. The production flow production error distribution of the sheet metal part based constructions is inspectedin this thesis. The objective of the thesis is to analyze the origins of production errors in the production flow of sheet metal based constructions. Also the employee empowerment is investigated in theory and the meaning of the employee empowerment in reducing the overall production error amount is discussed in this thesis. This study is most relevant to the sheet metal part fabricating industrywhich produces sheet metal part based constructions for electronics and telecommunication industry. This study concentrates on the manufacturing function of a company and is based on a field study carried out in five Finnish case factories. In each studied case factory the most delicate work phases for production errors were detected. It can be assumed that most of the production errors are caused in manually operated work phases and in mass production work phases. However, no common theme in collected production error data for production error distribution in the production flow can be found. Most important finding was still that most of the production errors in each case factory studied belong to the 'human activity based errors-category'. This result indicates that most of the problemsin the production flow are related to employees or work organization. Development activities must therefore be focused to the development of employee skills orto the development of work organization. Employee empowerment gives the right tools and methods to achieve this.