How Do Managers' Beliefs About New Technologies Evolve?

Investigators: CDEP Co-Director Eric Verhoogen, Ritam Chaurey, Siddharth Sharma, and Gaurav Nayyar

This project is conducting a randomized control trial on the determinants of adoption of an energy-efficient technology in the Bangladeshi manufacturing sector. The technology is a new motor for stitching machines, called a “servo” motor, which uses about 75% less electricity than traditional “clutch” motors. The project is providing information about the servo motors in varying intensities to managers of small and medium-sized enterprises (SMEs) in the leather goods and footwear industry. In one arm, it is installing a servo motor on one machine and electricity meters on that machine, and a machine with a clutch motor. In another arm, it is providing detailed information about the servo motor but install neither the motor nor the meters. A third group is serving as a control. In all three groups, the researchers are tracking the evolution of managers’ beliefs about cost savings from the servo motors and their willingness to pay for them. The results will shed light on how managers learn about new energy-efficient technologies and to what extent their reluctance to adopt new technologies is due to mistakes in information-processing versus a rational process of updating, given prior beliefs and noisy signals about the value of the new technologies.

The project has been funded by the J-PAL King Climate Action Initiative, the International Growth Centre, the Private Enterprise Development in Low-Income Countries (PEDL) initiative, and the Templeton World Charity Foundation.