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The Adoption of Multiple Dependent Technologies

Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213
Anderson School of Management, University of California, Los Angeles, California 90095
soohaeng{at}andrew.cmu.edu
kevin.mccardle{at}anderson.ucla.edu

A firm often makes an adoption decision regarding an improvement of one technology depending on changes in other technologies. For example, a manufacturer with a serial production line considers jointly upgrading multiple machines, or a firm producing an assembled product considers improving several components simultaneously. Economies or diseconomies of scope in the fixed cost of adoption when multiple improvements are undertaken at the same time generate an economic dependence among the technological innovations. Although the literature on technological innovations has attributed slow adoption mainly to uncertainties outside the firm, this paper shows that the economic dependence that inherently defines cost relationships inside the firm can significantly influence the timing of adoption. Furthermore, this impact is not unidirectional: economic dependence can either expedite or delay the adoption of an improved technology.

Subject classifications: dynamic programming; facility/equipment planning; technology.
History: Received April 2007; revision received September 2007; accepted December 2007.