Noncapital Investment Costs and the Adoption of CAD and CNC in U.S. Metalworking Industries
Abstract
Many studies have shown that firm size is the strongest and most consistent predictor of the adoption of technological innovations, but the causes for this relationship are debated. I investigate the relationships between various size measures and the adoption of computer-aided design (CAD) and computer numerically controlled (CNC) machine tools. Plant size is the dominant factor in predicting CAD and CNC adoption. Other measures such as firm size or multiplant operations have independent effects that are not present after controlling for plant size. I test four potential explanations for the results: noncapital cost spreading, equipment replacement, risk aversion, and learning. There is support only for the first explanation.