Many US manufacturers have been slower to adopt advanced manufacturing technology than has their foreign competitors. This fact has been cited as a leading cause of the decline in the global competitiveness of US manufacturers. The objectie of the research to be undertaken with this grant is to explain this puzzling behavior by US firms. This project is innovative in at least two ways. First, it will not concentrate on just one industry and one technology, but will examine many advanced technologies and many industries. Second, the project will replace the standard neo-classical theory of investment with one developed by Avinash Dixit and Robert Pindyck that explicitly assumes: (1) investment is irreversible, (2 firms are uncertain about both costs and benefits of investments in advanced technology and are constantly updating their estimates of these costs and benefits using new information, and (3) the investment can be deferred. The Dixit-Pindyck model will be tested using data from the Census Bureau s Survey of Manufacturing Technology for 1 988, 1991, and 1993. This data set provides information on the adoption of new technologies by plants, and includes variables that measure the level of uncertainty and the degree of irreversibility of the intestment.
