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The Case of the Microcomputer Hardware Industry in Ireland and Scotland NEW HIGH VOLUME PRODUCTION, PRODUCTION LINKAGES AND REGIONAL DEVELOPMENT: THE CASE OF THE MICROCOMPUTER HARDWARE INDUSTRY IN IRELAND AND SCOTLAND Chris Wilhelmus Andreas van Egeraat University Dublin City University Business School Supervisor Professor David Jacobson August 2002 Submitted for the degree of PhD at Dublin City University I hereby certify that this material, which I now submit for assessment on the programme of study leading to the award of a Ph D is entirely my own and has not been taken from the work of others save to the extent that such work has been cited and acknowledged within the text of my work Signed C i V -------------- 1 r ID No 96971835 Date 1 /”1/ ° 1 I( o7- REFERENCE ACKNOWLEDGEMENTS The first three years of research were funded by a Dublin City University Business School Scholarship Additional funding towards research and travel expenses was received from Forfas Ireland, which allowed me to undertake research in Scotland In the last stages, a Government of Ireland Research Scholarship in the Humanities and Social Sciences allowed me to finish the research I thank Karen for caring for our two darling daughters - Eppie Jean and Phoebe Lou - who both came to this world during the study period Furthermore, this dissertation would not have been completed without the guidance and advice of great number of academics at various institutes, notably Proinssias Breathnacht, Peter Dicken, Ivan Turok and Philip McCann Above all, I thank my supervisor David Jacobson for his support and Nick Phelps at the School of Geography, University of Leeds, for his efforts as external advisor during the research I can never repay all the staff members at the eleven microcomputer companies and regional development institutes for co-operating in this research and spending hours of their valuable time in interviews, often on multiple occasions I especially thank Kiaran McGowan, Donal Murphy and David Hanna at IDA Ireland, and Crawford Beveridge, Alex Bryce and Martin Togneri at Scottish Enterprise for facilitating the research Without their help I would never had gamed the exceptional access and reception that I enjoyed at the companies 111 TABLE OF CONTENTS CERTIFICATION » ACKNOWLEDGEMENTS m TABLE OF CONTENTS iv ABSTRACT vn LIST OF TABLES AND FIGURES vili LIST OF ABBREVIATIONS xi CHAPTER 1 INTRODUCTION 1 1 1 W h a t is this Dissertation About4? 1 1 2 W hat is New in this Dissertation? 8 1 3 T h e S t r u c t u r e o f t h e D issertation 9 CHAPTER 2 LITERATURE REVIEW AND THEORETICAL FRAMEWORK 11 2 1 Introduction 11 2 2 F o r d is m , P o s t -F o r d is m a n d N e w H ig h V o l u m e P r o d u c t io n 14 2 2 1 The Post-Fordist Debate 14 2 2 2 Flexibly Specialised Conglomerations of SMEs 17 2 2 3 Flexible Specialisation around Large Firms 23 2 2 4 New High Volume Production 26 2 3 N e w H ig h V o l u m e P r o d u c t io n T h e M a in In g r e d ie n t s 31 2 3 1 New High Volume Production Central Principles 34 2 3 2 Implications for the Elements o f the Value Chain 37 2 4 New High Volume Production and regional Development 50 2 4 1 Consequences for Regional Development in Non-core Regions Direct Effects 51 2 4 2 Consequences for Regional Development in Non-Core Regions Indirect Effects 55 2 4 3 Supplier Proximity for Efficient Formal Technical Information Exchange 59 2 4 4 Supplier Proximity for Logistical Efficiency 63 2 4 5 Aspects of NHVP-Related Supply Cham Strategies Leading to an Increase in the Linkage Distance 72 2 5 NHVP and Local Linkage Formation Four Research Patterns 74 2 6 A s s e s s in g t h e D y n a m ic I n d ir e c t R e g io n a l development I m p a c t 83 2 7 C o n c l u s io n 85 CHAPTER 3 METHODOLOGY 88 3 1 Introduction 88 3 2 Q u a n t i t a t iv e v e r s u s Q u a l it a t iv e A p p r o a c h e s t o R e s e a r c h 88 3 3 C a s e S t u d y R e s e a r c h 90 3 4 U n it or A n a l y s is a n d C a s e S e l l c t io n 9 1 3 5 T h e o r y , H y p o t h e s e s a n d G eneralisation 93 3 6 D a t a C o l l e c t io n 97 3 61 Phase One 99 3 6 2 Phase Two 104 3 6 3 Phase Three 108 3 7 D a t a A n a l y s is 1 1 1 3 8 V a l id it y a n d R e l ia b il it y 112 3 8 1 Construct Validity 113 3 8 2 Internal Validity 114 3 8 3 External Validity 116 3 8 4 Reliability 117 3 9 S u m m a r y 117 iv CHAPTER 4 THE MICROCOMPUTER INDUSTRY IN IRELAND AND SCOTLAND AND NEW HIGH VOLUME PRODUCTION 119 4 1 Introduction 119 4 2 T h e M icrocomputer In d u s t r y D e f in e d 119 4 3 G l o b a l G e o g r a p h y o f t h e M icrocomputer In d u s t r y 121 4 4 P r o m o t io n a n d D e v e l o p m e n t o f t h e M icrocomputer I n d u s t r y in Ir e l a n d a n d S c o t l a n d 127 4 4 I Ireland 127 4 4 2 Scotland 136 4 5 T h e M icrocomputer In d u s t r y a s N e w H ig h V o l u m e P r o d u c t io n 144 4 5 1 Customer Relations and Distribution 146 4 5 2 Product Development 1$1 4 5 3 The Assembly Plant 155 4 5 4 Corporate Organisation and Subsidiary Roles 163 4 5 5 Supplier Relations 173 4 6 Co nc lu s io n s 183 CHAPTER 5 GEOGRAPHICAL CONFIGURATION OF SUPPLY CHAINS AND THE ROLE OF BUYER-SUPPLIER PROXIMITY DRIVERS 188 5 1 Introduction 188 5 2 S o u r c e o f S u p p l ie s o f t h e M icrocomputer a s s e m b l e r s 189 5 2 1 Complete Computer Systems ¡90 5 2 2 Metal and Plastic Parts 192 5 2 3 Motherboards Backpanels and Riser Cards I95 5 2 4 Microprocessors 197 5 2 5 Memory 198 5 2 6 Storage Drives 198 5 2 7 Power Supply 200 5 2 8 Heatsinks and Fans 200 5 2 9 Batteries and AC-adapters for Portable Computers 201 5 2 10 Modems and Network Components 201 5 2 11 Graphics Video and Sound Cards 203 5 2 12 Cables and Interconnect 204 5 2 13 Screws Fasteners and other 'C-class' Items 205 5 2 14 Displays 206 5 2 15 Keyboards Mice and Joysticks 207 5 2 16 Printers Scanners and Digital Cameras 208 5 2 17 Speakers and Microphones 209 5 2 18 Docking Stations for Portable Computers 209 5 2 19 Media 209 5 2 20 Kits 210 5 2 21 Packaging Material 211 5 2 22 Sub-assembly and Rework Services 212 5 2 23 Components for Board Assembly Line 213 5 2 24 Summary of Location of Suppliers 215 5 3 Relevance of Technical Inform ation Exchange and Logistical Efficiency as D rivers fo r Proximi ty 2 23 5 4 In b o u n d P ip e l in e S t r a i e g ie s a n d S t r u c t u r e s 2 3 0 5 41 The Rise o f Hubbing 231 5 4 2 Advantages o f Hubbing 234 5 5 O p t im a l o r S u b - o p t im a l In b o u n d L o g is t ic s S o l u t io n s 2 3 8 5 5 1 Key Inbound Logistics Data Collected 239 5 5 2 Were the inbound Inventories Tightly Managed9 242 5 5 3 The Effect of Component Characteristics and Contextual Conditions 251 5 6 Relevance of Oti ier N HVP-Related Issues Believed to Lead to an Increase in ti ie linkage Distance 259 5 7 D y n a m ic In d ic a t o r s o r In d ir e c t R e g io n a l D e v e l o p m e n t E f f e c t s 2 6 1 5 8 C o n c l u s io n 273 v CHAPTER 6 CONCLUSIONS 277 6 l C ontribution t o t h e l it e r a t u r e 2 7 7 6 2 L im it a t io n s o f t h e S t u d y 2 8 8 6 3 Implications f o r In d u s t r ia l D e v e l o p m e n t P o l ic y 2 9 0 6 4 S u g g e s t io n s f o r F u r t h e r R e s e a r c h 293 BIBLIOGRAPHY AND LIST OF INTERVIEWS 296 APPENDIX A LETTERS SENT TO FOCAL COMPANIES 312 A 1 L e t t e r o f Introduction 3 13 A 2 In v it a t io n t o P a r t ic ip a t e in S e c o n d St a g e o f R e s e a r c h 3 14 APPENDIX B QUESTIONNAIRES 315 B 1 Questionnaire fo r Interview 1 315 B 2 Questionnaire fo r Interview 2 320 B 3 Postal Questionnaire 332 B 4 Questionnaire fo r Telephone Interview 339 APPENDIX C EXAMPLE OF TABLE WITH SUPPLY CHAIN DATA USED IN ANALYSIS (EXAMPLE GATEWAY) 341 APPENDIX D DETAIL OF FOCAL COMPANIES' REGIONAL SUPPLIERS 346 APPENDIX E INBOUND PIPELINE STRATEGIES AND STRUCTURES OF INDIVIDUAL FOCAL COMPANIES 358 APPENDIX F KEY LOGISTICS DATA ON INDIVIDUAL COMPANIES 373 VI 11 * ML ABSTRACT New High Volume Production, Production Linkages and Regional Development The Case of the Microcomputer Hardware Industry in Ireland and Scotland Chris van Egeraat The dissertation explores the regional development effects, via production linkages, of subsidiaries of multinational enterprises that have adopted New High Volume Production (NHVP) approaches, in non-core regions NHVP approaches are positioned amid other post-Fordist forms of industrial organisation There are literatures that suggest that the adoption of NHVP approaches will have positive implications for regional development of non-core regions because of greater indirect, backward linkage, effects Theoretically, local linkage formation or buyer- suppher proximity in NHVP industries might be the outcome of three drivers It can be driven by a search for efficiency in product flow/logistics, efficiency in formal information exchange in the context of inter-firm functional integration and by socio­ cultural and institutional factors enhancing information flow in a local milieu This dissertation investigates the role of the first two drivers in shaping the geographical configuration of backward linkages in NHVP industries This is done in a case study of the microcomputer hardware industry in Ireland and Scotland The findings of the case study do not support the positive suggestions of greater backward linkage effects A detailed examination of the supply chains of the subsidiaries of foreign microcomputer assemblers shows that the vast majority of components and parts were imported from the Far East and, to a lesser extent, the USA It is shown that efficiency in technical information exchange was a relatively insignificant driver for buyer-supplier
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