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Factors leading to offshore manufacture of Australian inventions: the case of the orbital combustion process engine

Manley, Karen Jane (1994) Factors leading to offshore manufacture of Australian inventions: the case of the orbital combustion process engine. PhD thesis, Murdoch University.

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This thesis focuses on the factors which lead to off-shore manufacture of Australian inventions. It establishes this phenomenon as a problem, both in terms of its incidence in the post-war period, and in the strategic importance of innovative activity to economic growth. The thesis utilises a case study approach and concentrates on the experiences of one company, the Orbital Engine Corporation (Orbital). In 1989 Ralph Sarich, inventor of the Orbital Combustion Process (OCP) engine and founder of Orbital, signed an agreement with the Michigan state government to manufacture the engine in the United States of America (USA), in preference to several alternative sites in Australia and overseas. This occurred in the context of Orbital actively pursuing assistance from the Australian government to secure local production. The research question is: Why did Orbital decide to manufacture its engine invention ofshore? A multi-disciplinary approach to this question is adopted. Three different conceptual frameworks are employed: industrial organisation theory, market failure theory and policy network theory. The analysis is not structured around a pre-existing hypothesis; instead, the aim is to generate potential explanations for more rigorous testing by subsequent researchers.

The thesis concludes that, in terms of industrial organisation theory, the decision to manufacture OCP engines off-shore was a function of the poor quality of the Australian industrial context and the failure by those seeking assistance from the Commonwealth government to stress Orbital's status as an exemplary enterprise in Australian industry. Market failure theory indicated that offshore production of the OCP engine was made more likely by the suboptimal operation of the price mechanism, the neglect of market failure arguments by those supporting local production of the engine and 'government failure'. Policy network theory explained Orbital's decision as the result of: ineffective employment of negotiation tactics by proponents of the engine's domestic manufacture; and the chaotic nature of negotiations which allowed certain personal and ideological prejudices to dominate the issue resolution process.

It is shown that some or all of these explanations underlie a number of other examples where Australian inventions have been manufactured offshore. In commenting on policy implications, the thesis points to the economic potential of the Orbital invention and the value of interventionist industry policy. The thesis identifies a number of actions which might be taken to lower the incidence of foreign manufacture of Australian inventions. Further research is necessary to determine the relative importance of the various factors which are identified as leading to offshore production. In addition, there remains a particularly crucial need to improve the social efficiency of existing cost-benefit techniques employed by government policy-makers and commercial analysts.

Item Type: Thesis (PhD)
Murdoch Affiliation(s): Institute for Science and Technology Policy
Supervisor(s): Newman, Peter and Harman, Elizabeth
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