Economic performance of product and process firms

This dissertation refines the understanding of economic performance of firms, using data and practical insights from the automotive supplier industry. Firms in this industry are characterized as either product or process firms, reflecting the importance of technological capabilities in manufacturing industries. Specialized capabilities in product markets define product firms, whereas capabilities in materials processing and manufacturing technologies define process firms. A measure of technological coherence is introduced, which expresses the relatedness of capabilities of a firm. The measure is based on a concentration index and a hierarchical classification of products and processes in the automotive supplier industry. Using this measure of coherence, analysis shows that firms with stronger coherence are able to better exploit corporate synergies and therefore achieve superior economic performance. That is, firms focusing on a specialized and related set of capabilities are able to outperform less coherent firms. Analysis further reveals a significant difference in performance between product and process firms. Product firms in the automotive supplier industry exhibit negative returns to scale, whereas process firms exhibit positive returns to scale. These differences are attributed to the underlying corporate logic of product and process firms, supported with studies of value creation in corporate acquisitions and interviews with corporate executives. The findings have implications for strategic choices of firms, such as choosing between product and process focus, and choosing between focus and diversification. The dissertation contributes to strategic management theory with a framework of product and process firms that is based on a technological view of the firm, and with a measure of technological coherence that facilitates empirical research of corporate coherence.

Department dc:contributor.department

Massachusetts Institute of Technology. Engineering Systems Division.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2000

Author dc:creator

• Steinemann, Patrick P. (Patrick Paul), 1969-

Advisor dc:contributor.advisor

• John B. Heywood.

• Engineering Systems Division.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/8789

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/8789