The New Technology Markets 9 High Tech Value Chains

We define 9 high tech value chains, where we believe most of America’s innovation occurs in sustaining product innovations and radical technology crossover between industrial sectors.

We use the analysis of Dr. Ed  Feser, of the University of Illinois, to define the nine value chains, also sometimes called industrial clusters. Feser’s most recent work is titled, Benchmark Value Chain Industry Clusters For Applied Regional Research, (October 2005, Department of Urban and Regional Planning & Regional Economics Applications Laboratory (REAL), University of Illinois).

The nine value chain main categories are:

1.      Chemicals

2.      Precision Instruments

3.      Engine Equipment

4.      Computer and Electronic Equipment

5.      Information Services

6.      Pharmaceuticals

7.      Fertilizer and Chemical Products

8.      Industrial Machinery and Distribution Equipment

9.      Aerospace

Each main category of a value chain has members from different industrial sectors who trade with each other in producing a final finished good or product. Sometimes this activity is called a “supply chain, or a value chain.”

In the Feser methodology of deriving the value chains, each value chain consists of industry i, for example firms in Petro Chemicals are trading partners with firms in the 13 other industrial sectors who make up the Chemicals Value Chain. Firms from the Petro Chemical sector buy supplies from its suppliers (upstream firms) and sells to firms who are customers in  (downstream) industries. For example, Petro Chemicals sells products to Plastic Materials & Resins.

In principle, there is a distinct value chain for each main value chain category. For example, the Chemicals Value Chain can be identified by the 13 members who trade with each other.

In practice, the Feser method applies statistical factor analysis on coefficients in a national input output table to identify a reduced number of value chains that are, in essence, groups of industries with highly similar—and therefore linked—chains. The great value of the Feser method is that it describes both the production technology of how a good is made, and also identifies the market of buyers for that good, as it winds its way to becoming a finished good, in the final demand marketplace.

In the Feser method, any given value chain category would be comprised of members from industrial sectors whose trading relationships and linkages with one another are stronger than their linkages with sectors outside the group.

In the New Technology Markets Newsletter, we start with the nine high technology value chains, and apply the insights from a theory of technological evolution, called Structural Evolutionary Regional Economic Theory (SERET) , to come up with ideas and insights for investment opportunities in future markets.

You can read more about SERET in our book, Predicting Technology, (2007). You can also visit another website where we describe more about the implications of technological evolution.

The Nine High Technology Value Chains and Individual Industrial Sector Members

Title of                             Input Output           Industrial Sector Members

Value Chain                              Classification

Title of                             Input Output           Industrial Sector Members

Value Chain                              Classification

Title of                             Input Output           Industrial Sector Members

Value Chain                              Classification