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Supplier Relations and Adoption of New Technology: Results of Survey Research in the U.S. Auto Industry

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  • Susan Helper

Abstract

Using an original data source, this paper investigates the circumstances under which firms adopt computer numerical control (CNC), an important type of flexible automation which can significantly increase productivity, product variety and quality. The paper shows that arms'-length supplier/customer relationships are a significant barrier to CNC adoption, even where CNC would improve efficiency. For firms where CNC would be efficient, but who currently receive little commitment from their customers, an increase in contract length of one year would increase the adoption rate by 30%. These results have theoretical implications in two areas. First, the paper integrates questions of appropriability into the technical change literature, by adding supplier relations as a determinant of technology adoption. Second, the paper extends transaction-cost analysis, by relaxing the assumption that agents' private maximizing behavior will always produce organizational forms that maximize social efficiency.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5278.

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Date of creation: Sep 1995
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Publication status: published as With David I. Levine, published as "Long-Term Supplier Relations and Product-Market Structure", Journal of Law, Economics and Organization, Vol. 8, no. 3 (1992): 561-581.
Handle: RePEc:nbr:nberwo:5278

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  1. J. Bradford De Long & Lawrence H. Summers, . "Equipment Investment and Economic Growth," J. Bradford De Long's Working Papers _122, University of California at Berkeley, Economics Department.
  2. Timothy H. Hannan & John M. McDowell, 1984. "The Determinants of Technology Adoption: The Case of the Banking Firm," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 328-335, Autumn.
  3. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-85, March.
  4. Carlsson, Bo & Jacobsson, Staffan, 1994. "Technological systems and economic policy: the diffusion of factory automation in Sweden," Research Policy, Elsevier, vol. 23(3), pages 235-248, May.
  5. Lieberman, Marvin B, 1991. "Determinants of Vertical Integration: An Empirical Test," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 451-66, September.
  6. Paul Joskow, 1984. "Vertical Integration and Long Term Contracts: The Case of Coal Burning Electric Generating Plants," Working papers 361, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Riordan, Michael H. & Williamson, Oliver E., 1985. "Asset specificity and economic organization," International Journal of Industrial Organization, Elsevier, vol. 3(4), pages 365-378, December.
  8. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  9. Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-64, November.
  10. Ray, George F., 1989. "Full circle: The diffusion of technology," Research Policy, Elsevier, vol. 18(1), pages 1-18, February.
  11. Mandfield, Edwin, 1989. "The diffusion of industrial robots in Japan and the United States," Research Policy, Elsevier, vol. 18(4), pages 183-192, August.
  12. Sharon Oster, 1982. "The Diffusion of Innovation among Steel Firms: The Basic Oxygen Furnace," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 45-56, Spring.
  13. Hannan, Timothy H & McDowell, John M, 1984. "Market Concentration and the Diffusion of New Technology in the Banking Industry," The Review of Economics and Statistics, MIT Press, vol. 66(4), pages 686-91, November.
  14. Helper, Susan & Levine, David I, 1992. "Long-Term Supplier Relations and Product-Market Structure," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(3), pages 561-81, October.
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Cited by:
  1. No, Angela, 2008. "Cities and Growth: Knowledge Spillovers in the Adoption of Advanced Manufacturing Technologies," The Canadian Economy in Transition 2008018e, Statistics Canada, Economic Analysis.
  2. Bronwyn H. Hall & Beethika Khan, 2004. "Adoption of New Technology," Development and Comp Systems 0401001, EconWPA.
  3. José Albors & José Hervas & Antonio Hidalgo, 2006. "Analysing High Technology Diffusion and Public Transference Programs: The Case of the European Game Program," The Journal of Technology Transfer, Springer, vol. 31(6), pages 647-661, November.
  4. Athey, Susan. & Stern, Scott, 1969-, 1998. "An empirical framework for testing theories about complementarity in orgaziational design," Working papers WP 4022-98., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  5. Carlsson, Bo, 1992. "The Rise of Small Business: Causes and Consequences," Working Paper Series 357, Research Institute of Industrial Economics.
  6. Maria Alipranti & Emmanuel Petrakis, 2012. "The speed of technological adoption under price competition: two-tier vs. one-tier industries," Working Papers 1307, University of Crete, Department of Economics, revised 08 May 2013.
  7. Sharon Novak & Scott Stern, 2007. "Complementarity Among Vertical Integration Decisions: Evidence from Automobile Product Development," NBER Working Papers 13232, National Bureau of Economic Research, Inc.
  8. Susan Athey & Scott Stern, 1998. "An Empirical Framework for Testing Theories About Complimentarity in Organizational Design," NBER Working Papers 6600, National Bureau of Economic Research, Inc.
  9. Bakos, J. Yannis. & Brynjolfsson, Erik., 1993. "When quality matters : information technology and buyer-supplier relationships," Working papers 140. Working paper (Sloan, Massachusetts Institute of Technology (MIT), Sloan School of Management.

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