The microeconomics of manufacturing modernization programs

Manufacturing modernization programs are designed to improve the competitiv eness of small- and medium-sized manufacturers by accelerating their use of best-practice technologies. Justification for these programs is most often cast in terms of past slow rates of adoption, international economic compe titiveness, and market failures in the provision of information. These fram eworks, however, do not adequately address policy and programmatic issues r elated to program design, financing, and program evaluation. Using a microe conomic model based on the firm- and industry-level effects of these progra ms, we examine the importance of spillover benefits from modernization effo rts, both horizontal spillovers to rivals of program clients and vertical s pillovers to clients' customers, and the implications for these policy and programmatic issues. (C) 1999 Elsevier Science B.V. All rights reserved.