Optimal adoption of complementary technologies

Boyan Jovanovic, Dmitriy Stolyarov

    Research output: Contribution to journalArticle

    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.

    Original languageEnglish (US)
    Pages (from-to)15-29
    Number of pages15
    JournalAmerican Economic Review
    Volume90
    Issue number1
    DOIs
    StatePublished - Mar 2000

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    ASJC Scopus subject areas

    • Economics and Econometrics

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