Technological Change and Learning: A model of manager decisions and team organisational forms DIMETIC PhD course, 15.10.2007 Lise Arena GREDEG, University of Nice Sophia-Antipolis Oriel College, Oxford University
Aim of my Ph.D. � A contribution to Management Studies: - Analysing how managers inside the firm make choices about technology adoption - Understanding the reorganisation of the firm’s worker teams in order to match the new technological requirements � Analysis of the nature of the link between the technology adoption decision taken by the manager and the technology implementation process within his team of workers
Aim of my Ph.D. � This aim gives rise to: - Studying the case of a single firm facing an evolving environment outside its control - Adopting a definition of the firm such as a set of interactions between heterogeneous agents in their competencies, beliefs and expectations
Aim of my Ph.D. � An Evolutionary approach? - Bounded rationality and uncertainty - Make technological change endogenous � BUT, - Management studies framework - Focusing on the adoption of technology by a single firm rather than on interactions between the market and firms on the diffusion process of new technologies in the economy as a whole (i.e. no analysis of the feedbacks effects at an aggregate level)
Main Themes and questions � Technological Change: - How are the manager decisions formed? - To what extent a team of workers’ competencies are crucial in the implementation process of an innovation? - How do these competencies and the implementation success of a new technology within a team influence the manager’s decision of technology adoption?
Main Themes and questions � Workers competencies in the Firm: - How do interactions and competencies between the workers influence the performance of a new technology? - To what extent the different learning rates between workers affect the choice of a new technology by the manager?
Main Themes and questions � Learning Process: - To what extent do managers learn from their past mistakes in their technological decisions? - How is this learning process related to the structure of their teams?
Some Theoretical Considerations (1) � Definition of the firm: - The firm cannot be reduced to its entrepreneur as in standard microeconomics - The firm includes – at least - a manager and a team of workers - It is an organisation including heterogeneous agents with various competencies [Teece] - Switching to a new technology involves costs or ‘lock-in’ phenomena [Arthur] which influence managers decisions � Organisational forms and technological change matter in the development and the story of the firm
Some Theoretical Considerations (2) � Individual and Collective learning: (1) At the team’s level: - Studying the synergy between individual and collective competencies / individual and team learning (2) At the manager’s level: - The managerial learning function differs from the workers learning processes
Some Theoretical Considerations (3) (1) At the team’s level: *Individual learning: Heterogeneous agents with different learning rates and competencies *Collective learning: Synergy between different individual learning processes from the extreme case of completely isolated workers (team learning = sum of individual learning processes) to the one in which a high level of imitation allows the least competent to learn from the most experienced workers
Some Theoretical Considerations (4) (1) At the manager’s level: * Individual learning: learning from his past mistakes * Organisational learning: the manager’s decisions or learning ability are affected by the team’s learning
A Basic Model of Technology Adoption � Main assumptions of the Model: (1) N technologies. At each short-period, the manager only knows a sub-set of N � choice between sticking to the currently used technology or adopting one of the technologies offered in the sub-set. Obviously, at each time period, the sub-set differs from what it was at the last period.
A Basic Model of Technology Adoption (2) Within this sub-set, the manager chooses a technology, i . It is assumed that the manager chooses the technology with the highest expected performance Pi = max(P) (3) Once chosen, a technology must be implemented during a period T (4) The performance expected by the manager for each new technology Pi is assumed to be equal to: Pi =c pi + r
A Basic Model of Technology Adoption (5) The performance of technology i is assumed to be a combination of the workers’ competencies (6) The competencies are assumed to follow a sigmoid function (7) Every worker is assumed to have mastered the technology by the end of the implementation period (8) The model assumes that workers can learn at different rates
Learning at a team’s level: Competences of 3 different workers with (dots) or without learning (lines) from each other h = S ( t ) − − + ( t t ) / w 1 e 0 Competencies ( x ) τ d ∑ j = + τ − τ a b ( x [ ( t )] x [ ( t )]) j k k j j dt k Time (T)
A Basic Model of Technology Adoption (9) Assumptions (7) and (8) imply if the existing technology is used again, the implementation period is not required. In the next implementation period T , the true performance is assumed to be constant and equal to max(pi) (10) Switching to a new technology does not require direct costs as such. It however implies a decrease in performance during the implementation period of the new technology
A Basic Model of Technology Adoption Technology performance Time
A Basic Model of Technology Adoption � Results of the Model: [1] Analysis of three levels of uncertainty: (*) Manager’s imperfect knowledge of the new technology performance [random noise] (**) Managers psychological preferences, continuous range of possible values of c (***) Manager’s imperfect knowledge of the future competencies of his team
A Basic Model of Technology Adoption � Results of the Model: [2] Importance of the managers degree of preference for innovation in his understanding of the search process for the best possible technology
A Basic Model of Technology Adoption
Value of Manager Technology Learning ‘switched on’ c behaviour performance towards innovation c < 1 too strong low Better performance than without aversion Better performance than without 1 <c< 2 Right high behaviour c > 2 Switching Lower and Compensation of the high frequency too many lower for switching by the team’s fast times learning capacity
A Basic Model of Technology Adoption � Results of the Model: [3] Organisational forms and learning process within a team matter in the decisions taken by the manager on technological change – [e.g. even if the manager is overconfident (c>2), switches too often to new technologies and therefore decreases his firm’s ability for innovation, there is a compensation effect from the learning abilities of his team of workers].
Concluding Remarks Simplicity of the model paves the way to three main possible extensions: - Extend the organisational forms to a range of intermediary team organisations determined by empirical observations - Abandon the constancy of c and consider an evolving degree of preference for innovation over time, through an adaptive learning process [classifier engine?] - Introduce long time period phenomena, assuming a slow decrease over time in the existing technologies
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