Input/output ranges and performance: an examination of US machine tool producers

Firms in the machine tool (MT) industry produce capital goods that are critical to the manufacturing efforts of other industrial producers, especially those that engage in metalworking activity. Today, US companies in this small but strategically important sector are exposed to substantial import competition, as well as to strong competition from foreign companies that have established branch facilities inside the USA. While there are signs that some US firms have expanded their geographic market ranges domestically and internationally, many producers still sell within a relatively restricted geographic area. This paper examines the interconnections that exist between the geographic input-output ranges of US machine tool producers and various indicators of business performance. Evidence is taken from a national survey of 104 MT companies. The empirical results suggest that geographically extensive sourcing correlates positively with company performance, and the same holds true for marketing (e.g. serving national or global customers delivers better results). Overall, the survey findings suggest that the most successful MT companies serve global markets and/or source globally for inputs.