Complementarity and Cost Reduction: Evidence from the Auto Supply Industry
Over the last 20 years, the success of Japanese manufacturing firms has brought renewed attention to the importance of cost reduction on existing products as a source of productivity growth. This paper uses survey data and field interviews from the auto supply industry to explore the determinants of average-cost reduction for a sample of 171 plants in the United States and Canada between 1988 and 1992. The main result is that the determinants of cost reduction differ markedly between firms which had employee involvement programs in 1988 and firms that did not. The two groups of firms achieved equal amounts of cost reduction, but did so in very different ways. Firms with employee involvement saw their costs fall more if they also had such involvement gained no cost-reduction benefit from these programs; instead, their cost-reduction success was largely a function of increases in volume. These results provide support for Milgrom and Roberts's concept that certain production practices exhibit complementarity.
|Date of creation:||May 1997|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:cup:cbooks:9780521282437 is not listed on IDEAS
- Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
- Helper, Susan & Levine, David I, 1992. "Long-Term Supplier Relations and Product-Market Structure," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(3), pages 561-81, October.
- Aoki, Masahiko, 1990. "Toward an Economic Model of the Japanese Firm," Journal of Economic Literature, American Economic Association, vol. 28(1), pages 1-27, March.
- Kim B. Clark, 1989. "Project Scope and Project Performance: The Effect of Parts Strategy and Supplier Involvement on Product Development," Management Science, INFORMS, vol. 35(10), pages 1247-1263, October.
- Casey Ichniowski & Kathryn Shaw & Giovanna Prennushi, 1995. "The Effects of Human Resource Management Practices on Productivity," NBER Working Papers 5333, National Bureau of Economic Research, Inc.
- Samuel Hollander, 1965. "The Sources of Increased Efficiency: A Study of DuPont Rayon Plants," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258235x, June.
- Paul S. Adler & Kim B. Clark, 1991. "Behind the Learning Curve: A Sketch of the Learning Process," Management Science, INFORMS, vol. 37(3), pages 267-281, March.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6033. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.