Abstract

This paper examines, in an efficiency wages setting, the technology adoption problem faced by a firm. It is shown that the adoption of new technologies may be delayed, or even that it does not take place, for firms which are price makers on the labour market. A general result of inefficient technology adoption is derived. This result follows from the impact of technology induced spillovers effects on workers' reservation utility. Better technologies determine higher reservation utility levels and this, in turn, implies that the firm must pay higher wages in order for the participation and the incentive constraints of workers to be satisfied.