AUTOMATION CAPITAL INVESTMENT AND MARKET DOMINANCE

Strategy & Business Policy

Speaker: Victor Bennett

Professor at University of Utah

Videoconference

Abstract: 

Recent research suggests that large firms are becoming increasingly
dominant and suggests that one reason is the increasing availability
of automation technology. Whether automation contributes to dominance,
though, depends on which firms adopt it.  Using novel plant-level data
on automation, I show patterns consistent with the equilibrium effect
of investment in automation capital depending on three effects: scale,
investment capability, and demand-stealing effects. The scale effect
has been well-established, the role of demand stealing---the extent to
which a focal firm can only expand its market by selling to customers
who would otherwise be served by competitors, and their interaction
with automation capabilities have not been studied empirically. In
addition to shedding light on when firms invest in automation capital,
these results may help reconcile contradictory empirical results in
the literature on the association between process-improving
technologies and market dominance.