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

Abstract

Using an original data source, this paper investigates the circumstances under which fmns adopt computer numerical control (cNC), an important type of flexible automation which can significantly increase production 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 through 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 may social efficiency.