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An Option-Value Approach to Technology in U.S. Maufacturing: Evidence from Plant-Level Data
An Option-Value Approach to Technology in U.S. Maufacturing: Evidence from Plant-Level Data
Working Paper Number CES-00-12
Abstract
Numerous empirical studies have examined the role of firm and industry heterogeneity in the decision to adopt new technologies using a Net Present Value framework. However, as suggested by the recently developed option-value theory, these studies may have overlooked the role of investment reversibility and uncertainty as important determinants of technology adoption. Using the option-value investment model as my underlying theoretical framework, I examine how these two factors affect the decision to adopt three advanced manufacturing technologies. My results support the option-value model’s prediction that plants operating in industries facing higher investment reversibility and lower degrees of demand and technological uncertainty are more likely to adopt advanced manufacturing technologies.
Page Last Revised - October 8, 2021
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