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Financial Analytics: Science and Experience
 

Analysis of the impact of organizational structure of industry on high-tech products costs

Vol. 7, Iss. 35, SEPTEMBER 2014

Available online: 21 September 2014

Subject Heading: ISSUES ON ECONOMICS

JEL Classification: 

Pages: 29-39

Baibakova E.Yu. Trapeznikov Institute of Control Sciences, Russian Academy of Sciences, Moscow, Russian Federation
elenabaibakova@mail.ru

Importance Until recently, full cycle enterprises prevailed in most sectors of the Russian high-tech industries. In the current market conditions realization of full cycle of development and production on every enterprise turns out as unprofitable. It leads to unnecessary duplication of fixed costs and, consequently, to an increase in production costs.
     Objectives Inflexibility of the structure does not allow responding to changes of demand in proper time. There is a need for fundamental restructuring of the Russian high-tech industries, i.e., the transition from full cycle enterprises to network organizational structures in which there are specialized companies-suppliers of components and production services, as well as system integrators, delivering finished products to consumers. The formation of a network organizational structure has already been successfully implemented in most sectors of foreign high-tech industries. The question is why, despite the advantages described above, the current organizational structure of the Russian high-tech industries is far away from the above described network structure?
     Methods In the article, I study the economic factors, which encourage and hamper the transition to the network organization structures. I propose the economic-mathematical models of production costs of high-tech products in various organization structures, including the ones when vertically integrated full cycle enterprises are available, also when the network organization structures with rigid links between suppliers and customers are used, as well as upon availability of flexible links, and when forming virtual manufacturing groups with non-permanent personnel.
     Results I have elaborated such factors as a technological similarity of the same kind products and their constituent element, learning-by-doing effect, transaction cost accompanying the change of partners, as well as contract risks of third-party vendors' and customers' interaction.
     Conclusions and Relevance On the basis of the parametric analysis of the worked out models I define the conditions of preference of various organizational structures of science-intensive industry (a case of civil aircraft manufacturing).

Keywords: organizational set-up, full cycle enterprise, network organization structure, virtual enterprise, system integrator, transaction costs, contractual risk, production cost, effectiveness

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