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Technological Change and Productivity Growth in the Air Transport Industry Nathan Rosenberg, Alexander Thompson and Steven E

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Technological Change and Productivity Growth in the Air Transport Industry Nathan Rosenberg, Alexander Thompson and Steven E https://ntrs.nasa.gov/search.jsp?R=19790002826 2020-03-22T02:24:03+00:00Z NASA Technical Memorandum 78505 (NASA-T-78505) TECHNOLOGICAL CHANGE AND -N79-10997l PRODUCTIVITY GROWTH IN TEE AIR TRANSPORT INDUSTRY (NASA) 101 p HC A06/HF A01 CSCL 02A Unclas G3/01 :36965 Technological Change and Productivity Growth in the Air Transport Industry Nathan Rosenberg, Alexander Thompson and Steven E. Belsley , September 1978 REPRODUCEDBY NATIONAL TECHNICAL; INFORMATION SERVICE US.DEPARTMENTOFCOMMERCE SPRINGFIE[D. VA.22161 National Aeronautics and Space Administration NOTICE THIS DOCUMENT -HAS BEEN RE PRODUCED FROM THE BEST COPY FURNISHED US BY THE SPONSORING AGENCY. ALTHOUGH IT IS RECOGNIZED THAT CERTAIN PORTIONS AR E ILLEGIBLE, IT IS BEING RELEASED IN THE INTEREST OF MAKING AVAILABLE AS MUCH INFORMATIQN AS POSSIBLE. 1. R rt No. 2. Government Accession No. 3. Recipient's Catalog No. 4. Titleand Subtitle 5.Report Date TECHNOLOGICAL CHANGE AND PRODUCTIVITY GROWTH IN 6.Performing Organization Code THE AIR TRANSPORT INDUSTRY 7. Author(s) 8.Performing Organization Report No. Nathan Rosenberg,* Alexander Thompson,* and A-7514 Steven E. Belsleyt 10. Work Unit No. Organization Name and Address 992-21-01-90-01 9. *StanfordPerforming University, Stanford, Calif. 94305 tAmes Research Center, NASA, Moffett Field, 11. Contract or Grant No. Calif. 94035 13. Type of Report and Period Covered 12. Sponsoring Agency Name and Address Technical Memorandum National Aeronautics and Space Administration 14. Sponsoring Agency Code Washington, D.C. 20546 15. Supplementary Notes 16. Abstract The progress of the civil air transport industry in the United States has been examined in the light of a proposal of Enos who, after examining the growth of the petroleum industry, has divided that phenomenon into two phases, the alpha and the beta; that is, the invention, first development and production, and the improvement phase. The industry did indeed develop along similar lines with the technolog­ ical progress coming in waves; each wave encompassing several new technolog­ ical advances while retaining the best of the old ones. At the same time the productivity of the transport aircraft as expressed by the product (VcxAs) of the aircraft velocity CVc) and the passenger capacity (AS) increased sufficiently to allow the direct operating cost in cents per passenger mile to continually decrease with each successive aircraft development. 17. Key Words (Suggested by Authorls)) 18. Distribution Statement Air transportation Unlimited Technology transfer Aircraft design STAR Category - 01 19. Security assf. (of this report) 20. Security assif. (of this pa) , Unclassified Unclassified *For sale by the National Technical Information Service, Springfield, Virginia 22161 ­ NASA Technical Memorandum 78505 Technological Change and Productivity Growth in the Air Transport Industry Nathan Rosenberg and Alexander Thompson, Stanford University, Stanford, California Steven E. Belsley, Ames Research Center, Moffett Field, California NASA National Aeronautics and Space Administration Ames Research Center Moffett Field, California 94p35 TECINOLOGICAL CHANGE AND PRODUCT IVITY GROWTH IN THE AIR TRANSPORT INDUSTRY Nathan Rosenberg and Alexander Thompson Department of Economics Stanford University Steven F. Belsley Planning & Analysis NASA-Ames Research Center Moffett Field, CA 94035 August 4, 1977 (Revised November 15, 1977) I I -1- INTRODUCTION When most people think of the technological innovations of the 20th Century, they think of such things as radio, television, antibiotics, birth-control pills, and synthetic materials, synthetic fibres, automobiles, helicopters, jet transports, airplanes, atom bomb, space exploration, computers. This is perfectly proper. The 20th Century has witnessed numerous spectacular innovations, and it is perfectly appropriate that technological innovation should be symbolized in peoples' minds by dramatic breakthroughs such as these. However, ifwe shift our thinking to other levels, the story becomes much more complicated. For the social process out of which such innovations eventually emerged was usually much less dramatic, consisting of innumerable " steps, most of them typically very small, in the fashioning of a new device or technique. Moreover, such technological innovation itself has a long "pre­ history," during which time it is subjected to a series of improvements until it becomes practically workable. It also has a long "post-history," during which time the innovation is subjected to a prolonged series of further improve­ ments. Such improvements may include redesigning to economize on materials, substitution of new materials possessing superior performance characteristics, modifications to meet the specialized needs of numerous submaikets or sub-uses, treatment procedures to prolong the life of components, -etc. The point is that our mental conceptions offer a still-picture of what is, in reality, a long, drawn out dynamic process. These points become particularly significant when our concern is not restricted to technological history in the narrow sense but inciudes the economic consequences of new technologies. For, things which may be of secondary or even of trivial importance for technological history may be the very essence of economic success or failure. Innovations which in technoldg­ ical terms are quite spectacular and compelling may fail to meet elementary -2­ commercial tests and constitute economic failures. Conversely, minor, pedantic improvements in a product or process which may be totally unnewsworthy and, indeed, invisible to all except highly trained specialists, may spell , the decisive difference between commercial success or failure. Thus, the economic analysis of a technological innovation may involve a very different focus from what appears in popular or engineering accounts. Even where an innovation involves entirely new concepts, or constitutes a genuine discontinuity, a sharp and dramatic departure from the past, its contribution to the growth of productivity will make itself felt only more slowly, as numerous obstacles are overcome, as many small improvements and modifications are introduced, and as necessary conditions are fulfilled which are essential to the full exploitation of improvements which already exist. Application of technology to users' needs requires a demand (either active or latent) for a service that can be satisfied by a new device or devices. At the time the new device is developed and introduced it must embody those technology advances that enable it to meet the performance requirements and return a profit to both the builder and the user. In addition, increases in the useability of the device can create an increased demand for it, and as more of the devices are manufactured and sold opportunity exists to improve the device to make it even more useable or profitable. When the market becomes large enough, other builders will construct other devices and will use the available pool of technology in a different way to develop a marketable device. Studies of the flow and ebb of industries, especially the petroleum refining industry, has led Enos1 to offer an explanation of technological progress which divides that phenomenon into two phases, the alpha and the beta. The alpha phase consists of the invention, development and first production plants. The beta phase consists of the improvement of the innovation to improve the economic viability of the device. -John mos, "Invention and Innovation in the Petroleum Refining Industry, n The Rate and Direction of Inventive Activity, Princeton University Press, 1962. -3- This study examines and analyzes the air transport industry from the point of review of the alpha and beta phase concept of Enos to determine if these phases can be applied to this industry and to shed some light on the motivating forces afoot in the industry. GENERAL BACKGROUND In any industry, the growth of that industry is usually brought about by providing a need not satisfied elsewhere. In the transport industry, this need is speed of movement. Of course, the public is not prepared to pay unlimited amounts for this increase in speed. Indeed, as we will show innovations have been introduced in the air transport industry only when they have been associated with cost reduction or obtaining another desirable characteristic. It has been proven many times that the passenger is willing to pay a premium for this speed. The growth of the air transport industry from its inception in 1926 stimulated by the government by contracting with private concerns to carry the U.S. air mail has been steady and sometimes very rapid (see Fig. 1).2,3 Because of the original payment schemes for airmail routes of so many dollars per mile of route flown 2Smith, Henry Ladd, Airways; the History of Commerical Aviation in the United States, A. A. Knopf, N. Y., 1942. arner, E. P., The Early History of Air Transportation - A Lecture delivered at Norwich University, No. 21, 1937, Maple Press, York (England) 1937. -4­ per trip, there was not a great emphasis on passenger-carrying capability, although this increased as more. experience was gained with the flying of the route and provided extra revenue to the operators. Previous passenger­ carrying operations were hard put to make ends meet without airmail payments. In addition, the U.S. Government constructed and maintained lighted airways, promoted airfields and provided other services that were very necessary to the operation of aircraft across country on a regular basis. Because
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