A strategic analysis of flexible manufacturing systems

In this paper a game theoretic model is presented by which investment in flexible manufacturing systems (FMS) is analyzed. If the investment in this innovative production system is viable (due to either revenue enhancements or cost reductions) the result is a competition for the first move among similar firms in an oligopolistic industry. As a result, the Schumpeterian hypothesis of investment in a technological innovation occurring within an industry by ‘swarms’ appears to apply to FMS diffusion. Empirical evidence supporting the results of the theoretical analysis is presented.