Complementarities, Momentum, and the Evolution of Modern Manufacturing

Complementarities, Momentum, and the Evolution of Modern Manufacturing

By
Paul R. Milgrom, Yingyi Qian, John Roberts
American Economic Review, Papers and Proceedings. May
1991, Vol. 81, Issue 2, Pages 84-88

In the 19th century, the railroad and telegraph were at the center of a set of technological advances, physical investments and managerial innovations that transformed American industry (Alfred Chandler). Later, the automobile and telephone played a similar role in another transformation. Today, the high-tech industries include computers, telecommunications and electronics. Working on our remarkably powerful computers (even as they rapidly become obsolete), coauthoring papers by electronic mail and fax, and conversing on our portable cellular telephones, we are struck by what appears to be a self-supporting and reinforcing dynamic to the technological improvements across the electronics industries. An advance almost anywhere in the sector seems to call forth more advances across the sector. These advances are occurring contemporaneously with a broad pattern of other changes, not only in the electronics industries, but in manufacturing more generally, and not just in hardware, but in methods and organization as well. A new paradigm has begun to emerge. In contrast to traditional manufacturing firms, modern firms frequently (1) make greater use of flexible, programmable