American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Optimal Adoption of Complementary Technologies
American Economic Review
(pp. 15–29)
Abstract
When a production process requires two extremely complementary inputs, conventional wisdom holds that a firm would always upgrade them simultaneously. We show, however, that if upgrading each input involves a fixed cost, the firm may upgrade them at different dates, "asynchronously." This insight helps us understand why productivity rises with the age of a plant, why investment in structures is more spiked than equipment investment, and why plants have spare capacity. The bigger point of the paper is that complementarity does not necessarily imply comovement—not even for a single decision maker.Citation
Jovanovic, Boyan, and Dmitriy Stolyarov. 2000. "Optimal Adoption of Complementary Technologies." American Economic Review 90 (1): 15–29. DOI: 10.1257/aer.90.1.15JEL Classification
- E22 Capital; Investment; Capacity
- G31 Capital Budgeting; Fixed Investment and Inventory Studies
- O33 Technological Change: Choices and Consequences; Diffusion Processes
- D24 Production; Cost; Capital and Total Factor Productivity; Capacity