INFLUENCE OF EXPORT CONTROL POLICY ON THE COMPETITIVENESS OF MACHINE TOOL PRODUCING

ORGANIZATIONS Dissertation Oral Defense Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Business Administration

Jeffrey D. Ahrstrom

University of Phoenix

COMMITTEE MEMBERS

• Bruce Laviolette, PhD, Dissertation Chair

• Ladonna Eanochs, PhD, Committee Member

• Kevin Bottomley, PhD, Committee Member

CONTENT

Problem

Study Purpose

Research Questions

Theoretical Framework

Relevant Literature

Terms & Abbreviations

Method& Design

Research Results

Research Implications

Conclusions

Study Significance

Recommendations

Study Limitations

Reflections

Dissemination of Research

PROBLEM

• Domestic export control policy imparts competitive disadvantages for manufacturers of export-controlled machine tools.

• Inefficiencies of Licensure & Direct Restriction.

• External influences may reduce sales opportunities. (Barkema, Drabenstott, & Tweeten, 1991; Borst, 2012; Burris, 2010; Porter, 1990).

Overt Political Responses to the Geopolitical Environment are Considered but Not the Focus of this Research.

STUDY PURPOSE

• Quantitative Examination of Potential Influences that Export Control Impart on Competitiveness of Domestic Machine Tool Manufacturers.• Participant perceptions of domestic export policy relative to supporting

or not supporting export business activities.• Policy Influences on Export Participation

Does Export Control Policy Support or Deter Sales Activities of Domestic Manufacturers?

RESEARCH QUESTIONSResearch Question 1

RQ1: What is the relationship between perceptions of domestic export policy as supportive of a firm’s export activity and the total percentages of sales from export?

H10: There is no participant perception that a supportive domestic export policy is related to the percentage of total sales from export.

H1a: There are participant perceptions that a supportive domestic export policy is related to the percentage of total sales from export.

RESEARCH QUESTIONS• Research Question 2

RQ2: To what degree is export policy a determining factor in market participation by machine tool manufacturers?

H20: There is no difference in market participation between firms with supportive export policies and firms with non-supportive export policies.

H2a: There is a difference in market participation between firms with supportive export policies and firms with non-supportive export policies

THEORETICAL FRAMEWORK• Competitiveness Theory

• Porter (1990)– Internal & External forces. • Who has a say in in your ability to compete?

• Firm Strategy (Internal), Structure (Internal), Rivalry (External)

• Harrison & Kennedy (1997) – External factors include government influence.• Policy and Politics influence firm strategy with equivalent access to inputs.

• Tusche (2011) – Government significant competitive factor in global trade.• With global access to technology, material & labor, policy influence expands in

importance.

Relevant Literature • Leonidou and Katsikeas (2010) - “Significant” gap in research of export control influence

on trade.• Mysen (2013) – Indications of export policy influence on manufacturers international

activity.• Atta et al. (2008) – Export control influences various segments of industrial trade.• Burris (2010); Freedenberg (2010) & Porter (1990) – Restrictive governmental policy

restricts firm opportunity and activity.• Freedenberg (2010); Koo (2007) – U.S. export policy on Dual-Use Technology =

Competitive Disadvantage for domestic manufacturers.• Kawasaki (2009) – Export policy contributing factor to decline of domestic machine

manufacturers.• Watts et al. (2009); Lombardo et al. (2009) – Direct link between domestic export policy

& sales loss by U.S. manufacturers.• Borst (2012) – Domestic export regulatory system grounded in Cold War paradigm.• Auer (2005) – U.S machine tool restrictions create opportunity for foreign firms.

KEY TERMS & ABBREVIATIONSTERMS:

• Machine Tool: Powered piece of equipment designed to accurately and repeatedly cut or profile rigid materials that generally.

• Dual-Use: Technology that can be used for both peaceful and military aims.

• Bureau of Industry Security: U.S. government department addressing issues of national security and high technology. A principal goal for the bureau is helping stop proliferation of weapons of mass destruction.

ABBREVIATIONS:Arms Export Control Act .......................................................AECA

Association for Manufacturing Technology ..........................AMT

Bureau of Industry and Security ............................................BIS

Commerce Control List..........................................................CCL

Department of Commerce ......................................................DOC

Department of Defense ..........................................................DOD

Directorate of Defense Trade Controls ..................................DDTC

Export Control Classification Number ..................................ECCN

Federal Office of Economics and Export Control .................BAFA

Military Critical Technologies List ........................................MCTL

Missile Technology ................................................................MT

Missile Technology Control Regime .....................................MTCR

National Academy of Sciences ..............................................NAS

National Security ...................................................................NS

North Atlantic Treaty Organization .......................................NATO

Nuclear Nonproliferation .......................................................NP

Nuclear Suppliers Group........................................................NSG

Office of Foreign Asset Controls ...........................................OFAC

Treaty on the Non-Proliferation of Nuclear Weapons ...........NPT

Wassenaar Arrangement ........................................................WA

Weapons of Mass Destruction ...............................................WMD

MACHINE TOOL EXAMPLES

METHOD & DESIGNQUANTITATIVE METHOD:• Descriptive- Quantifying possible influences of export control policies on the

competitiveness of machine tool producing organizations.

• Correlational – Compare theoretical market model to actual export shipments in a specific market to examine inconsistencies of consequence.

• Comparing results from a Likert-type survey to theoretical and actual market results provided the context for understanding influences of export control on organizational competitiveness.

• Triangulation – Comparison of data obtained from development of hypothetical market models, actual market models, and responses to the user survey offer a method to arrive at results from the different inputs to identify divergences or congruencies

RESULTS

Two research questions addressed;

1. Relationships between industry participant perceptions of export policy as

being supportive of a firm’s export activity and the total percentages of sales

from export.

2. Examination to what degree export policy is a determining factor in market

participation by machine tool manufacturers.

RESULTSRQ1 - Null hypothesis stated, “There is no participant perception that a supportive

domestic export policy is related to the percentage of total sales from export.”

• Results of this analysis were not significant, and insufficient evidence existed to

reject the null hypothesis.

• Spearman rho correlation analysis did not indicate a significant relationship at an

alpha of .05 (rs (95) = -.09, p = .403)

• Scatterplot of survey results does not indicate any visually

ascertainable polytonic relationships.

Figure 7. Scatterplot between sales from export and perceptions of export policy.

RESULTSRQ2 - Null hypothesis stated, “There is no difference in market participation between

firms with supportive export policies and firms with non-supportive export policies.”

• Results of this analysis were significant, indicating that sufficient evidence existed to

reject the null hypothesis in favor of the alternative.

• Results of a Kruskal-Wallis analysis indicated significant differences regarding

the perceptions of market participation between participants in firms with

supportive versus non-supportive export policies (H[1] = 6.43, p = .011). Table 6 Kruskal Wallis Test Results for Market Participation by Supportive Export Policy

Supportive Non-supportive

Variable M Mean Rank M Mean Rank H(1) p

Market participation 3.44 70.79 2.83 51.28 6.43 .011

PRACTICAL IMPLICATIONS Aligned with data developed during this research the assertion that export control policies

impose a competitive obstacle on domestic machine tool organizations did not find

support.

1. Rejection of restrictive export control policy paradigm.

2. Firm Strategy (Internal), Structure (Internal), Rivalry (External) should become

competitive focus.

3. Export markets are a viable space to market products.

4. Successful exporters are successful in part because they choose to export.

1. Export markets are a focus and not an afterthought.

CONCLUSIONS• The assertion that export control policies impose a competitive obstacle on domestic

machine tool organizations did not find support in the research.

• Majority participation of survey respondents in export activity.

• Rejection of RQ2 Null Hypothesis & Failure to Reject RQ1 Null Hypothesis.

• Export policy is not a restrictive factor.

• Theoretical Market Model Aligns with Actual Market. Indicating minimal or

mitigated external (export policy) effect.

• Successful exporting organizations develop strategies and operational plans

aligned with necessity of export market.

CONCLUSIONS

Study Significance• Presents formal study of domestic export control policy effects on competitiveness

of machine tool producing organizations.

• Anecdotal, opinion, and tangential literature on the subject but limited

academic review.

• Presents a framework for leadership in the industry to examine in

development of export market strategies.

CONCLUSIONS

Recommendations• Machine tool producing organizations should consider export markets as viable

opportunities.

• Competitive environment in export markets may differ but is not unique in terms of

Product Technology, Local Support, Market Exposure.

• Industry Trade Group Support of Export Activity.

• Expand Export License Education to Remove Mystique and Fear of Complexity.

LIMITATIONS• Availability of data that provided sufficient specificity to conduct an analysis of the

discrete market-influencing factors.

• Commodity shipment data gathered from secondary sources subject to inaccuracy.

• Industry organizations, government reports, and trade groups.

• Aggregate data did not include specifics of pricing, machine features, or

capabilities, nor did it include final manufactured component details that could

further support this investigation.

• Small sample size of domestic machine tool producer population included in research.

REFLECTIONS• Overcomplicated the research by expanding into gravity models and triangulation

discussions.

• Would have liked to narrow focus to large “complex” equipment.

DISSEMINATION OF RESEARCH

• Publication of research in University of Phoenix Library and ProQuest databases.

• Presentation of results to Detroit Society of Manufacturing Engineers (SME) during Fall

meeting.

• Submitted abstract for presentation of research during International Machine Tool Show

(IMTS) in September 2016.

• Submit abstract of research to industry magazine The Fabricator” in July 2016.

• Share results with associates at Bureau of Industry Security Materials Processing and

Equipment TAC Committee.