Review of Industrial Organization 14: 219–238, 1999.
© 1999 Kluwer Academic Publishers. Printed in the Netherlands.
Does Microelectronics Reduce Economies of
Scale? A Case Study in the Turkish Chemical
DILEK CETINDAMAR KARAOMERLIOGLU
Department of Economics, Case Western Reserve University, 414 Wickenden Hall, 10900 Euclid
Avenue, Cleveland, OH 44106-7206, U.S.A.
Abstract. This paper delves into the question of how new technologies affect economies of scale at
the empirical level. As theoretical studies are inconclusive, we introduce a case study in the Turkish
chemical industry to observe the dynamics of the relationship between technology and economies of
scale. By observing the changes in the sources of economies of scale, output and unit costs in our
case study ﬁrms, we showed that while economies of product scale stayed stable, both economies of
plant and ﬁrm scales increased in the chemical industry.
Key words: Chemical industry, economies of scale, process control technology, Turkish chemical
Does new technologies transfer the production from a scale-intensive system in
which ﬁrms have been large and rigid to a new system in which ﬁrms are small and
ﬂexible? The studies on the scale question as such are inconclusive, since while
some studies indicate a move towards smaller scale in production and organization
(Kaplinsky, 1990; Milgrom et al., 1990), many others highlight the tendency to-
wards a growth in scale (Alcorta, 1992). As it is not yet clear how extensive these
changes in scale are, detailed empirical studies are needed to discover the impact
of new technology on economies of scale.
Therefore, this paper aims to provide some empirical data about the nature and
extent of the impact of new technologies on economies of scale (EOS). Considering
the breadth of the subject, there is a need to focus as much as possible. In order to
do so, we will limit ourselves to the investigation of the impact of process control
technology (PCT) on EOS in the chemical industry (CI).
Recent technological developments in continuous production are related to PCT
that is based on the control of process, production and ﬁrm activities of ﬁrms
I would like to thank Hacer Ansal, Ziya Onis, Ludovico Alcorta, and Bo Carlsson for their
helpful comments on the paper.