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Technological frontiers and competition in multi-technology sectors

2004; Taylor & Francis; Volume: 14; Issue: 1-2 Linguagem: Inglês

10.1080/1043859042000228660

1476-8364

Andrea Bonaccorsi, Paola Giuri, F. Pierotti,

Economic Growth and Productivity

Abstract This article aims to investigate some conceptual and methodological issues on the measurement of technological change in multi-technology product sectors. It develops a methodological contribution by building a measure of the technological frontier and of firms' technological positioning based on multiple technical characteristics by using data envelopment analysis techniques. The methodology is applied to the study of the technological evolution and competition in the commercial jet aero-engine industry from 1958 to 1997. The empirical analysis shows that: the overall evolution is characterised by technological discontinuities, followed by incremental developments; there is convergence on the technological frontier by all competitors; at the same time, there is persistence of less efficient products over time. Keywords: TechnologyTechnological discontinuityFrontierData envelopment analysisAircraft engine Acknowledgements We gratefully acknowledge the precious comments from Prof. Attilio Salvetti (Department of Aerospace Engineering, University of Pisa), and from Dott. Cassaro and Ing. Dufour (Purchasing and Technical Department, Alitalia). Notes The model can be built on three different assumptions on returns to scale: (a) constant returns to scale: zk ≥ 0 ∀k; (b) non-increasing returns to scale: ; (c) variable return to scale: . The set of inputs and outputs may have the following properties: (a) strong disposability of inputs: if inputs are constant or decreasing, output is non-decreasing; (b) weak disposability of inputs: if inputs increase proportionally, output is non-decreasing; (c) strong disposability of outputs: it is possible to freely dispose of outputs (typical assumption about disposability of outputs); (d) weak disposability of outputs: proportional reductions of all outputs are feasible. However, it does not necessarily follow that reductions in individual outputs are feasible (i.e. the reduction of undesirable outputs may be costly). Some of them, like thrust, can be difficult to classify because they can be considered technical or service characteristics, according to the level of customers' technological knowledge. The software allows minimisation of outputs for determining allocative efficiency in a cost frontier. However, the optimisation problem of the cost frontier, which requires the use of price data, is different from the objective of determination of a pure technological frontier. This result is also confirmed by the analysis of technological competition disaggregated at the level of single technical characteristic which is developed in Bonaccorsi and Giuri (Citation2001a). Jet engine companies develop families of product designs, based on the concept of 'robust design' (CitationRothwell and Gardiner, 1989, Citation1990). Robustness allows some degree of economies of scale (high commonality of parts) and scope (high product variety) on the R&D and production side and offers the possibility of enhanced learning from user experience. This type of design applies not only to sequential introduction of models, but also to different more or less contemporaneous versions. For the aircraft industry Sutton (Citation1998) documents the presence of economies of scope in aircraft design by showing data about the non-recurring costs of the B747 and its versions. He comments: 'When a commercial jet is directly derived from its predecessor, its development cost may be less than 20% of its parent's. Even when planes are only distantly related, the degree of commonality, and so the level of cost savings, may be substantial'.