Research and Other Activities
For a listing of all publications please see CUSTAC Publication List.
- Strategic Destruction of the North American and European Commercial Aircraft Industry: Implications of the System Integration Business Model by David Pritchard and Alan MacPherson. Occasional Paper #35
This paper offers a critical perspective on the changing organizational structure of the Western commercial aircraft industry. The role of systems integration based on risk-sharing partnerships for new aircraft programs is explored. We find that build-to-print subcontracting relationships are being replaced by internationally devolved design and engineering tasks for airframe development, signaling a profound change in the structure and geography of commercial aircraft production. While sensible from a financial standpoint, the international outsourcing of design-intensive component production entails substantial amounts of technology transfer and the delivery of proprietary knowledge to risk-sharing partners. For several of the advanced market economies, including Canada, France, Germany, the UK, and the US, the long-range strategic downside is that foreign risk-sharing partners could eventually become competitors. Systems integration on a risk-sharing basis also implies home-country job-losses among skilled workers with expertise in design, engineering, and R&D.
- Perception of Border Security Along the Canada - U.S. Border, Grand Island, New York by Michael F. Ziolkowski. Occasional Paper #34
This paper investigates perceptions of security among residents of the Canada – US border at the west branch of the upper Niagara River,
Grand Island, New York.The results of a survey of residents are presented. The data suggest that some residents perceive security to be a concern
yet have not witnessed illegal activity nor changed their personal security practices to any great extent. A key finding is that male and
female perspectives on border security differ. The paper concludes with a brief discussion of the implications of the empirical findings for future
work on border security.
- The launch process for the Bombardier C-Series regional jet: Implications for Canadian Trade and Employment by David. J. Prichard
The commercial aircraft industry has been a symbol of Canadian export leadership in product-markets which require high levels of high levels of design and engineering innovation. This industry has been at the top of the Canadian export sector for more than 20 years. Many of the advanced production and engineering procedures developed by this sector have been successfully transferred to other Canadian industries. In future years, the only manufacturer of regional passenger jets (Bombardier) will opt for a systems integration mode of production. Under this system, key components and sub-assemblies are designed and manufactured by external suppliers. While this represents a logical strategy from a financial standpoint, a potential downside is that foreign subcontractors and or risk-sharing partners must receive infusions of tacit scientific and technical knowledge from Bombardier. This raises an important question that ought to be of interest to the Canadian trade policy analysts whom are concerned with national industrial competitiveness. Specifically, how does technology transfer to Chinese and Russian companies have positive long-term economic or industrial effects for the Canadian aerospace industry? Read more here: Bombardier
- The impact of U.S. government anti-terrorism policies on Canada-United States cross-border commerce by Alan MacPherson, James E. McConnell, Anneliese Vance and Vida Vanchan. This paper examines the extant and potential impact of U.S. government antiterrorism policies on Canada-U.S. cross-border commerce. Particular attention is focused upon the cross-border trade that takes place between Southern Ontario (Canada) and Western New York (U.S.). Evidence from a survey of Canadian and U.S. exporters suggests that U.S. antiterrorism measures have inflated the business costs of exporters on both sides of the border. These measures have also created shipment delays that ultimately translate into lost revenues. While some of these security-related initiatives have been motivated by a genuine concern for the well-being of U.S. citizens, they nevertheless act as non-tariff barriers to bilateral trade. We argue that a potential long-run consequence of these additional costs is trade diversion. The paper concludes with a brief discussion of the implications of the empirical findings for the geography of Canada-U.S. bilateral trade and foreign direct investment. This project is funded by the Canadian Embassy, Washington, DC. Please email authors for more information.
The Center has been awarded a contract from the Canadian Embassy to work on An Annotated Bibliography on the Economic Dimensions of Border Polices and Issue on the Canada-US Commercial Relationship. Alan MacPherson, Jim McConnell and Anneliese Vance are co-authors.
- The role of university-based industrial extension services in
the business performance of small manufacturing firms: case-study evidence
from Western New York by Michael Ziolkowski. Occasional
Paper #32.
This paper investigates the role of university-based industrial extension services in the business performance of small manufacturing firms in an economically declining region of the United States (Western New York). The outreach initiatives of a specific University at Buffalo (UB) program are described. Particular attention is given to the activities of UB's Centre for Industrial Effectiveness (CIE), an outreach unit with a mandate to improve the product and/or process development efforts of local manufacturing firms. Our data suggest positive returns on investment for firms that have sought technical support under CIE program. A key finding is that CIE's services typically entail the transmission of well-established procedures rather than radically new ways of doing things. A further finding is that firms that have used CIE to develop improved products have experienced stronger investment returns than their counterparts that have focused upon process development (though the returns are positive in both instances). More broadly, our data suggest positive correlations between levels of project investment and a variety of commercial outcomes, including sales growth, job-retention, and unit-cost reduction. The implications of these results for regional economic development policy are discussed. The paper also reviews some of the weaknesses that curtail the effectiveness of university-based centers such as CIE.
- Boeing's Diffusion of Commercial Aircraft Design and
Manufacturing Technology to Japan: Surrendering the US Aircraft Industry for
Foreign Financial Support by David Pritchard and Alan MacPherson.
This paper offers a critical commentary on the technology transfer through commercial aircraft outsourcing that has had a major impact on developing the build and design capabilities of the Japanese aerospace industry. This has evolved from a simple "build to print" subcontractor relationship to a turnkey "design and build" risk-sharing partnership. Using the Boeing 767, 777 and 787 as examples, we argue that the motives for Boeing's commercial outsourcing to Japan are to access the market, spread risk, gain access to capital, and lower US spending on research and development. This has clear implications for US trade and employment, in that Japanese subcontracting boosts foreign imports and reduces the need for domestic production workers and US suppliers. From a trade perspective, however, a potentially troubling feature of allowing the Japanese to produce large commercial aircraft subassemblies is that major Japanese public financial supports are involved which contravene existing international agreements on production subsidies. This paper reviews the types of production contracts that Japanese companies have sought on the Boeing 767, 777 and 787 programs. These contracts have allowed the Japanese to develop new capabilities in terms of production capacity, tooling, design and final assembly. Ultimately, these capabilities imply that Japan will eventually enter the market as a fully-fledged producer of commercial aircraft. This does not bode well for the western aerospace sector, since the Japanese government has recently funded a research program to produce a regional jet aircraft. Read the full report
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Outsourcing US commercial aircraft technology and innovation: implications for the industry's long term design and build capability by David Pritchard and Alan MacPherson.
This paper reviews the accelerating trend toward the formation of global inter-firm partnerships to design, develop, and manufacture new commercial aircraft. While the US has long enjoyed a strong comparative advantage in commercial aircraft production, this advantage is steadily weakening in light of growing international competition from the European Union, Brazil, and Canada. Several newly emerging markets (NEMs) are also beginning to challenge the US, including Russia, China, and India. The only remaining US producer of large passenger jets (Boeing) has opted for a systems integration mode of production, whereby manufacturing and design processes are distributed across an international network of risk-sharing partners. This business model has clear financial advantages for Boeing, but it also entails substantial levels of technology transfer from the prime contractor to the risk-sharing partners (the latter might eventually become competitors). We illustrate this point with regard to a variety of co-operative ventures between Boeing and several foreign companies. Our principal conclusion is that the financial imperatives driving this business model may soon compromise the ability of the US to maintain a significant presence on the manufacturing side of the commercial aircraft industry. The paper concludes with a brief discussion of the strategic implications of this scenario in terms of industrial employment, skills, and technological capability. Access the entire document.
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The trade and employment implications of a new aircraft launch: the case of the Boeing 7e7 by David Pritchard and Alan MacPherson
This paper offers a critical commentary on the launch process for a large commercial aircraft (LCA). Using the Boeing 7e7 as an example, we argue that the contemporary launch process bears little resemblance to previous practices. Specifically, the launch process involves both the domestic and foreign subsidies because US production is now organized under a 'systems integration' basis. Under systems integration, the lead company (Boeing) spreads risk across a network of suppliers and production partners. Although final assembly takes place inside the US, much of the value-added is shared across the production network (as much as 70 percent). This has clear implications for US trade and employment, in that international subcontracting boosts imports and reduces the need for domestic production workers. From a trade perspective, however, a potentially more troubling feature of the launch process is that major public subsidies are involved. While some of these subsidiaries are permitted under the World Trade Organizations's (WTO) subsidy rules (e.g. pre-production R&D support), other types of subsidies clearly violate the WTO's rules (e.g. infrastructure and production subsidies). This paper reviews the types of subsidies that Boeing has sought in the planning process for the 7e7 launch. Our evidence suggests that Boeing's launch process contravenes existing international agreements on production subsides. This does not bode well for the US commercial aerospace sector, especially in light of Boeing's need for a new aircraft program to compete with Airbus. Read the full 7e7 report
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US foreign direct investment in the London legal market: an empirical analysis by Bridget Cullen-Mandikos and Alan MacPherson
This paper examines the nature and timing of U.S. foreign direct investment (FDI) in the London legal market. Evidence from a survey of 38 U.S. subsidiaries suggests that FDI has taken place primarily to serve U.S. clients located within the United Kingdom. The evidence also suggests that early investors (pre-1990) belong to a core group of multinational companies with headquarter locations in first-tier U.S. cities (New York, Chicago, Los Angeles). Later investors more typically hail from smaller cities. A number of important differences between early versus late investors are revealed. Specifically, subsidiaries that were established prior to 1990 are more likely to enjoy local decision-making autonomy than their counterparts that entered the London market more recently. The paper concludes with a brief discussion of the implications of the survey findings for future research on FDI in professional services.
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The international decentralization of US commercial aircraft production: implications for US employment and trade by Alan MacPherson and David Pritchard Article in Press. Futures published by Elsevier Science Ltd.
This paper examines the role of industrial offset agreements in the global decentralization of US commercial aircraft production. Particular attention is given to the manufacturing processes involved in the design and assembly of large passenger jets (100 seats or more). It is argued that the current geography of aircraft production at the global level has been shaped by a new international distribution of input costs and technological capability. Specifically, low-cost producers within several of the newly emerging markets (NEMs) have acquired front-end manufacturing expertise as a direct result of industrial offset contracts and/or other forms of technology transfer (e.g. international joint-ventures, imports of advanced machine tools). We find that the growth of international offset agreements portend the transformation of Boeing from an aircraft manufacturer to a systems integrator. The economic implications of this potential reconfiguration of the US commercial aircraft industry are discussed in the context of several techno-market futures, some of which look rather bleak for US workers in this industry. Read the entire article here.
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The export characteristics of Canadian firms in the commercial geographic information systems (GIS) industry by Alan MacPherson
This paper examines the export characteristics of Canadian firms in the commercial geographic information system (GIS) industry. Evidence from a sample of 351 Canadian GIS companies suggests that export success correlates positively with a wide range of organizational variables, including R&D spending, external collaboration (alliances with complementary firms), recourse to government support systems, and occupational structure (in-house technical skills). A notable finding is that company size plays no discernible role in export performance. If anything, in fact, very small firms exhibit better export performance than their larger counterparts. A further finding is that some of the strongest predictors of export involvement pertain to the extent to which GIS firms exploit government programs and/or other public initiatives in areas that relate to foreign sales development. A regression analysis based on predictor variables from a two-group discriminant model (exporters versus non-exporters) reveals that export success is strongly influenced by in-house research effort, foreign travel, external collaboration, and product customization. The paper concludes with a brief discussion of the implications of the empirical results for policy-oriented research on export promotion.
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Asian Foreign Investment in the US: A Firm-Level Study of Technology Transfer by Jessie Poon and Alan MacPherson
The primary purpose of his project is to examine the knowledge acquisition processes of Asian manufacturing and information technology subsidiaries that have recently entered the US market via foreign direct investment (FDI). A secondary objective is to examine the factors that influence the location of these technology-seeking firms. The inquiry focuses upon four of the fastest growing suppliers of inward FDI to the US from industrializing Asia (Taiwan, South Korea, Hong Kong, and Singapore). Our central proposition is that the subsidiaries of Asian companies have been using FDI as a means of capturing knowledge spillovers from US firms and institutions. W also contend that these subsidiaries have established branch facilities in high-technology environments, Asian subsidiaries are able to access a wide range of positive externalities. These externalities (e.g. tacit knowledge) represent strategic inputs that support innovation and growth, giving Asian firms an opportunity to absorb best-practice manufacturing and marketing procedures. Rather than wait for technology transfer via US outward investment to Asia, a new model is emerging in which Asian companies proactively seek sate-of-the-art technology or know-how by establishing production facilities inside the US itself. This represents a radical departure from previous models of international technology transfer.
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The Locational Patterns of Foreign Direct Investment in The United States Between 1987 and 1997 by Vida Vanchan
This project examines the locational patterns of foreign direct investment in the United State between 1987 and 1997. It is conducted primarily to determine the extent to which foreign investment has changed from 1987 to 1997 in terms of the locational preferences of comparable U.S. investments in the manufacturing sector. Three separate analyses were performed to contrast the foreign investment location choices with those of U.S. domestic investors. The first analysis focuses on the total amount of gross property, plant and equipment used for manufacturing and all industries of the foreign affiliates and the U.S.'s affiliates in each state in the United States. The second and third analysis examines the total number of employment by all affiliates in manufacturing and all industries in each state. In addition, this study also examines the total capital inflows and outflows by all countries of Ultimate Beneficial Owners (UBO), and the total numbers of acquisitions and establishments of foreign affiliates.
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The Technological Revitalization of a Mature US Industry: The Case of Machine Tools by Alan D. MacPherson and Ronald V. Kalafsky
The US machine tool industry enjoyed a period of global dominance between the early 1900s and the late 1970s. In the final quarter of the last century, however, almost every major US producer lost domestic market share as a result of import competition. By the early 1990s, several segments of the US machine tool industry appeared poised on the edge of market exit. This paper argues that US producers have achieved a rebound in recent years. This rebound has been driven by a variety of innovation-related efforts, including improved machine design, increased R&D, a renewed emphasis upon export markets, and greater customization. Evidence comes from a national survey of 104 machine tool producers. A major finding is that recent employment growth has been concentrated among younger firms, especially those that have made strategic commitments to increased R&D spending, faster cycle times, and improved customer support. In contrast, the incidence of zero or negative employment growth is more pronounced among older firms, many of whom primarily serve local customers. The paper concludes with a brief discussion of possible futures for the US machine tool sector.
Page updated July 27, 2007