Organizational Barriers to Technology Adoption: Evidence from Soccer-Ball Producers in Pakistan

Abstract

This paper studies technology adoption in a cluster of soccer-ball producers in Sialkot, Pakistan. Weinvented a new cutting technology that reduces waste of the primary raw material and gave the technologyto a random subset of producers. Despite the arguably unambiguous net benefits of the technologyfor nearly all firms, after 15 months take-up remained puzzlingly low. We hypothesize that an importantreason for the lack of adoption is a misalignment of incentives within firms: the key employees (cuttersand printers) are typically paid piece rates, with no incentive to reduce waste, and the new technologyslows them down, at least initially. Fearing reductions in their effective wage, employees resist adoptionin various ways, including by misinforming owners about the value of the technology. To investigatethis hypothesis, we implemented a second experiment among the firms that originally received thetechnology: we offered one cutter and one printer per firm a lump-sum payment, approximately equalto a monthly wage, conditional on them demonstrating competence in using the technology in thepresence of the owner. This incentive payment, small from the point of view of the firm, had a significantpositive effect on adoption. We interpret the results as supportive of the hypothesis that misalignmentof incentives within firms is an important barrier to technology adoption in our setting.