The Cost of Accelerating Technology Transfer: An Empirical Analysis of Time Compression Diseconomies

Abstract

We empirically investigate acceleration costs in technology transfer via a replication of Teece’s (1977) early work on time-cost elasticities. Our dataset on the development of oil production facilities worldwide between 1997 and 2010 is similar to Teece (1977), but over 20 times larger. Our results contrast with previous studies. On average, the cost of accelerating technology transfer is negative: firms could have cut $7.2 million in costs by developing projects one month faster. For 87% of our projects, time compression diseconomies are not binding. Industry-average technology transfer inefficiencies are significant: over 36% of project time and costs are unnecessary delays and overspending. Finally, we estimate the determinants of time-cost elasticities. Our findings reassess firms’ capital allocation decisions and the role of time in Strategy theories.