Edited by Ludovico Alcorta
Published by Routledge and the UNU Press, 1998
ISBN 0-415-19153-X, 488 pages

Abstract
This book deals with the impact of new technologies on the prospects for industrialisation in developing countries. It examines the process and motives behind the diffusion of microelectronics-based forms of automation and associated organisational techniques or flexible automation (FA) in developing countries. It analyses the effects of FA on scale and scope economies and on optimal scale in developing country firms and identifies the technical and economic determinants for such consequences. It discusses the main implications of changes in scale and scope, and more generally of FA, for the establishment of industrial facilities in developing countries.
The extent and motives for diffusion of FA, and more specifically Computer-Numerically-Controlled (CNC) metal cutting machine tools, are examined at the global level on the basis of international data on production, trade and consumption of CNC and non-CNC metal cutting machine tools and at the local and firm level by looking at the use of these machine tools in Brazil, India, Mexico, Thailand, Turkey an Venezuela. An average of 10 firms, 62 firms in total, were interviewed in these countries. The impact of FA on scale and scope is discussed with regard to changes in three of its dimensions: product, plant and firm. The product scale dimension, the volume of production of any single batch sometimes referred to as lot size or production run, is then analysed in terms of the relationship between batch sizes, product variety and setting up times and costs. The plant scale dimension, the total plant output or capacity in a given period of time, is investigated by looking at the changes in technical capacities, production cost components and unit costs of the new equipment relatively to the machines it replaces. The firm dimension, total output or capacity of the entire firm which may include several plants, is analysed by focusing on the changes in overhead cost components, including administrative, marketing and research and development. Implications are then drawn about changes in production and cost conditions in the user industries, mainly mechanical engineering, and barriers to entry such as minimum effficient scales, degree of concentration, minimum investment requirements and vertical integration. The impact of these changes, as well as those of changing factor prices and biases, infrastructure and transport costs as well as size of the market, for the location of productionin developing countries is also discussed.

The main findings of the book include a relatively slow diffusion of FA in developing countries in general with the only exception perhaps of Korea, Taiwan, Mexico, Turkey and China. The main motives underlying diffusion include economic macroeconomic stability and improved product quality. Also, the new technologies have the potential to reduce product scale and increase product variety by reducing ‘fixed' setting up times and costs but whether this actually happens also depends on market considerations. The impact on plant scale is to increase optimal plant scale because of FA's capacity to integrate different kinds of machinery and produce at far higher rates than the technologies they replace and the significantly increased cost of the new machinery. Firm scale. however, does not seem to be increased mainly because of reduced research and develoment activity in surveyed firms.The book also concludes that on the whole the diffussuion of FA may act as an obstacle to industrialisation in developing countreis, entry into user industries may still be possible for large domestic firms, for multinationals seeking to relocate relatively simple but labour intensive assembly processes and for large and small firms in countries with significant domestic markets.

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