Complementarities Between Advanced Manufacturing Technologies

Abstract

During the past decade, manufacturers have invested heavily in the use of advanced manufacturing technologies (AMTs). The results of these investments have been mixed, as some organizations have seen significant returns while others have experienced major problems in implementation. As yet, the returns and complementarities between AMT have not been determined. Using complementarity assumptions developed by Milgrom and Roberts [P. Milgrom and J. Roberts, ldquoRationalizability, learning, and equilibrium in games with strategic complementarities,rdquo Econometrica, vol. 58, no. 6, pp. 1255-1277, 1990.], [P. Milgrom and J. Roberts, ldquoComplementarities and fit - strategy, structure, and organizational-change in manufacturing,rdquo J. Accounting Economics, vol. 19, no. 2-3, pp. 179-208, 1995], combined with the Survey of Advanced Technology in Canadian Manufacturing (a comprehensive AMT survey), a model of manufacturing plant productivity was developed. Constrained regression analysis reveals that the effective use of AMT depends on the types of AMT used in combination and that analysis done with a high level of aggregation of either size classes or industries will result in ambiguous conclusions. Insight into the impact of complementarities on optimal AMT adoption strategies is provided through solution lattices for medium plants and the vehicle industry.