Technological capabilities and international competitiveness: A study on the machine tool industry

There is an intense debate on the role of the machine tool industry in industrial development, the effects of new flexible manufacturing technologies, and the implications of a weak domestic machine tool industry for the international competitiveness of domestic engineering industries. Although the debate continues over the role of a domestic machine tool industry, there is no empirical evidence shown to support or reject various hypotheses on those subjects. This study is aimed primarily at clarifying and statistically testing the relationships between the machine tool industry and the engineering industries.;This study has found empirical support for the following two hypotheses: (1) Recent emphasis on flexible automation has been catastrophic for the U.S. machine tool producers, since they have faced serious problems in adjusting their solid technological position in the manufacturing of mass production equipment towards the manufacturing of flexible automation equipment. The U.S. engineering industries are negatively affected by the development of these new technologies by foreign firms because they tend to be supplied by the domestic machine tool producers for some time even though their products may be inferior to those of the foreign producers. (2) There are bidirectional 'Granger-causality' relations between the development of a domestic industry and the development of domestic engineering industries.