Abstract
Firms have been increasingly adopting virtual reality (VR) technologies for manufacturing purposes, but it is still unclear whether and how such VR-enabled manufacturing practices (VRMPs) can help firms improve production efficiency. Analyzing a sample of 87 US treatment firms that have adopted VRMPs and 87 matched control firms without such adoption over the period of 2010–2020, our difference-in-differences estimation suggests that the treatment firms gain more production efficiency improvement when compared with the matched control firms. We also find that the production efficiency improvement arising from VRMPs is more pronounced for firms facing high levels of labor volatility and market dynamism. Our additional analysis further suggests that applying VR technologies into different manufacturing stages and in different industrial sectors can result in different degrees of production efficiency improvement. Overall, our study demonstrates the positive effect of VRMPs on production efficiency but also reveals how the effect can vary across firms depending on their operating environments, VR application fields, and industrial sectors.
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