The Impact of Technology on Small Manufacturing Firms

Manufacturing firms with 250 employees or less currently comprise approximately 96 percent of all manufacturers in the U.S. (U.S. Bureau of the Census 1991). With small manufacturers representing such a significant part of the manufacturing sector, it is important for these firms to succeed and to continue to make a strong contribution to the U.S. economy. Several authors have evaluated technological factors contributing to small manufacturers' success (Garsombke and Garsombke 1989; Liberatore and Titus 1986; Steiner and Solef 1988). Garsombke and Garsombke (1989) suggested that numerical control (NC) was one of the earliest technological advances introduced to small manufacturers. Liberatore and Titus (1986) evaluated the usage of computer-controlled tools in small machine shops. They found that fewer than half of the firms studied used computer numerically controlled (CNC) machines. Those firms averaged only 1.8 CNC machines (6 percent) among the 31 machine tools in the shop. Even with limited CNC usage, their study indicated that the majority of firms recognized the need to update their technology. Similar results were found in a study conducted by Steiner and Solef (1988). The use of computer numerical controlled (CNC) equipment has become synonymous with the use of advanced manufacturing technology (Garsombke and Garsombke 1989; Liberatore and Titus 1986). In this study, the presence of CNC equipment was used to indicate that firms employed advanced manufacturing technology. Characteristics of these firms were identified and analyzed. In addition, the use of other advanced technologies, such as automated handling equipment, computer-aided design and computer-aided manufacturing (CAD/CAM), just-in-time manufacturing (JIT), simultaneous engineering, and total quality management (TQM) were evaluated. Prior empirical research provided initial insights into the challenges faced by small manufacturing firms and the effects the use of advanced technology has on these firms. The current study extends prior work on the adoption, utilization, and impact of advanced manufacturing technology in small manufacturing firms. Prior Research Today's competitive environment has caused manufacturers to reevaluate their production technologies. An emphasis on responsiveness to the customer, flexibility of product design, and an increasing requirement for quality has left small manufacturers searching for ways to increase their competitiveness and productivity. The use of advanced manufacturing technology is one alternative that may enable small manufacturing firms to become or remain competitive by providing them with the tools and techniques required to accommodate the increasing demands of their customers. Steiner and Solef's (1988) study of twenty-two firms identified factors that may have affected the success of small manufacturers. Of those firms exhibiting higher-than-average industry growth rates, 50 percent had adopted new technologies within the last three years. Conversely, only 13 percent of the firms exhibiting lower-than-average industry growth rates had updated their technology. The authors concluded that a strong relationship exists between firm success and the adoption of new technologies. Garsombke and Garsombke (1989) also found that firms using high technology were experiencing the most positive performance changes. High technology was defined in their study as automation, robotization, and computerization. Each of the 144 firms in the study ranked 26 performance factors in terms of how strongly they were related to technology. Such performance measures as increases in production output, increases in profit, increases in sales, increases in return on investment, and decreases in lead time were used in their study. Garsombke and Garsombke concluded that firms which were slow to adopt automation, robotization, and computerization may have suffered in the competitive environment. When Schroeder, Gopinath, and Congden (1989) evaluated the competitive position and financial performance of eight firms that used advanced manufacturing technology, the outcomes of their study were mixed. …