Technological environment

Objective Understand the meaning of technology and its impact on business Analyse the external environment needed to promote technology Explore the role of technology in promoting business competitive advantage Debate the ethical implications of technology

The agency/structure debate

Is technology the result of genius of inventors or innovators or is it the result of entrepreneurial adoption of the ideas within structural and institutional contexts that change over time?

What is technology?
Invention Product innovation Process innovation Application of knowledge to production

Productivity
A change in technology can increase productivity Can allow a country to achieve economic growth through shifting out its production possibilities See fig 3.1

Figure 3.1

Law of diminishing marginal returns

At any one moment in time if a business fully employs its resources it will still suffer from the law of diminishing marginal returns This arises because of capacity constraints Productivity will decline as we reach capacity and so costs increase Technology allows a business to lower costs and so production increases even if resources do not- efficiency is improved

Technology and national competitive advantage

Combination of internal and external factors that enables economic growth to occur as a result of technological change Entrepreneurial activity in response to external environmental changes Industrial revolution provides historical evidence as to how change occurred

Neo-classical Perspectives
Role of entrepreneur Markets allow specialisation and division of labour It is individual business entrepreneurial activity in response to markets that promotes technological change

Structuralist/institutionalist perspective
Role of government in boosting capital growth Changes in the political and social structures needed if markets are to grow Role of Education and Training (Human Capital)

New Growth Theory

Brings together these approaches Growth occurs through trade and diffusion of technology through education

Porters diamond model

Firm Rivalry Firm Responsiveness Clusters of Firms Role of Governments in supporting business through infrastructure and education provision

Technology and business competitive advantage

Porter also examines business competitive advantage Technology can either reduce costs Or allows a business to differentiate Businesses can obtain technological change across the value chain of the business

Value Chain
Horizontal functions
Basic infrastructure (finance, planning, information system, office technology) Human resources Technology development Purchasing departments

Vertical business operations

Inbound logistics (transport, handling, storage, information system) Production operations (process, materials, machines, packaging, design and testing) Outbound logistics Marketing Sales and service

Question
Be technology leader or technology follower?

The technology debate

Technology has obviously transformed our world Industrialisation Revolution provoked debates Gave rise to immense economic growth But caused social upheaval Luddites Social Reformers/radical critics

Criticism of old technologies

Environmental costs of reliance on traditional energy supplies of coal, gas, oil and nuclear Military Technology Industrial factory system

Optimism for New technologies

Information and communications technology Bio-Technology Nano-technology

Costs of technology-ethical questions

Cost to human welfare-will technology improve this in general? Will technology favour certain groups over others? Costs to the environment?- the precautionary principle Will technology allow businesses to gain monopoly power?

Question
What are the benefits of adopting the precautionary principle? What are the problems associated with it?

Appropriate technology
High Tech solutions not always appropriate Technology needs to be appropriate to local conditions

Conclusions
Technology can be simple or complex Successful technological improvement increases productivity At the national level it is a combination of external environmental factors and individual business enterprise that spurs technological change Technological change can occur across the value chain of a business

Conclusions
Technology can have harmful effects There is a need to develop an ethical framework in which to judge the effects of technology