Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Not all industrial sectors respond the same way to changes and shocks

30.06.2005


Business cycles are a fact of economic life and they can have a significant impact on new technology sectors where the risks are high and product development takes time. But research funded by the Economic and Social Research Council shows that not all sectors respond in the same way.



The project, conducted by Michael Kitson of the Judge Institute of Management (Cambridge’s Business School) and Dr David Primost of the ESRC Centre for Business Research, revealed a range of competency in handling economic changes and the use of a variety of coping strategies. Researchers worked closely with firms in the biotechnology and aerospace sectors in the UK and observed how they handled economic changes and shocks over three years (2002-2004). This was a period of slow economic growth, but with substantial falls in the valuation of technology-based firms. It also saw major geopolitical developments and events, including the aftermath of 9/11.

“Our aim was to find out how changes in the macroeconomy, and the inevitable shocks that occur, influence managerial behaviour and corporate strategy. We focussed on two high-tech sectors and examined how such behaviours and actions affect competitiveness and long-term growth,” said Michael Kitson. “We believe our findings are relevant to mangers and policy makers as different sectors, responded differently; so generalities need to be avoided.”


Many biotechnology firms believed that the majority of economic changes had only a negligible impact on them and almost never influenced important decisions, particularly about the development and commercialisation of science. However, one economic variable, the decline in the stock market and hence the availability of finance, did have an impact. Only those firms with large cash reserves felt relatively insulated from changing valuations of their businesses.

To generate new finance, many biotechnology firms tried to increase revenues streams, improve efficiency and many altered their business models. Venture capitalists were, however, stymied by a lack of exit routes for their investments so they only continued to finance firms with technologies in the later stages of development - and therefore closer to market. This caused some firms to drop technology in its early stages - technology that could in the longer term have made a significant contribution to economic growth.

In the aerospace sector there were different perceptions and actions. There was a strong awareness of business cycles and macroeconomic changes. To avoid vulnerability, portfolios of activities driven by different business cycles were developed, and risks were reduced by changing sources of revenue from high value equipment, to an emphasis on after market service and sales. Many made a ‘virtue of necessity’ in response to world events and pushed through organisational changes such as, reducing excess capacity post 9/11. In addition, the global crisis in aviation was used as an opportunity to implement process improvements and rationalise supply chains.

“In the biotechnology sector, young firms at critical business junctures may lack the competence to cope with changes in financial markets. For these firms, a failure to acquire finance can prevent commercialisation of technology and stunt growth,” said Michael Kitson. “In contrast, more mature firms in the aerospace sector have learned more effective business coping strategies. It’s important that policy makers take account of these types of differences in their planning.”

Becky Gammon | alfa
Further information:
http://www.esrc.ac.uk

More articles from Business and Finance:

nachricht Preferential trade agreements enhance global trade at the expense of its resilience
17.02.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Breakthrough with a chain of gold atoms

In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport

In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport

Im Focus: DNA repair: a new letter in the cell alphabet

Results reveal how discoveries may be hidden in scientific “blind spots”

Cells need to repair damaged DNA in our genes to prevent the development of cancer and other diseases. Our cells therefore activate and send “repair-proteins”...

Im Focus: Dresdner scientists print tomorrow’s world

The Fraunhofer IWS Dresden and Technische Universität Dresden inaugurated their jointly operated Center for Additive Manufacturing Dresden (AMCD) with a festive ceremony on February 7, 2017. Scientists from various disciplines perform research on materials, additive manufacturing processes and innovative technologies, which build up components in a layer by layer process. This technology opens up new horizons for component design and combinations of functions. For example during fabrication, electrical conductors and sensors are already able to be additively manufactured into components. They provide information about stress conditions of a product during operation.

The 3D-printing technology, or additive manufacturing as it is often called, has long made the step out of scientific research laboratories into industrial...

Im Focus: Mimicking nature's cellular architectures via 3-D printing

Research offers new level of control over the structure of 3-D printed materials

Nature does amazing things with limited design materials. Grass, for example, can support its own weight, resist strong wind loads, and recover after being...

Im Focus: Three Magnetic States for Each Hole

Nanometer-scale magnetic perforated grids could create new possibilities for computing. Together with international colleagues, scientists from the Helmholtz Zentrum Dresden-Rossendorf (HZDR) have shown how a cobalt grid can be reliably programmed at room temperature. In addition they discovered that for every hole ("antidot") three magnetic states can be configured. The results have been published in the journal "Scientific Reports".

Physicist Dr. Rantej Bali from the HZDR, together with scientists from Singapore and Australia, designed a special grid structure in a thin layer of cobalt in...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Booth and panel discussion – The Lindau Nobel Laureate Meetings at the AAAS 2017 Annual Meeting

13.02.2017 | Event News

Complex Loading versus Hidden Reserves

10.02.2017 | Event News

International Conference on Crystal Growth in Freiburg

09.02.2017 | Event News

 
Latest News

Microhotplates for a smart gas sensor

22.02.2017 | Power and Electrical Engineering

Scientists unlock ability to generate new sensory hair cells

22.02.2017 | Life Sciences

Prediction: More gas-giants will be found orbiting Sun-like stars

22.02.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>