Soccer, as we’ll be reminded every day this month, is a global game, but soccer ball production is dominated by just a few regional hubs. The city of Sialkot in Pakistan produces 30 million soccer balls per year—40 percent of the world’s supply. Their customers include the World Cup teams.
Sialkot’s soccer ball industry is the subject of a new paper—not yet published—by a team of economists from Yale, Columbia, and the Lahore School of Economics. The researchers aimed to understand how factories decide whether or not to adopt new technology. Economists have puzzled over this question, but this study is unique in that the researchers actually invented new equipment, introduced it to the factory owners, and watched what happened over the next year.
Traditionally, factories cut the balls’ pentagons and hexagons out of rectangular sheets of rexine, a type of artificial leather. The team of economists designed a way to reduce the amount of rexine wasted and, according to their calculations, cut rexine costs by over 6 percent.
The economists then introduced the owners of 35 soccer ball factories to the new equipment and explained its benefits, hoping to study the process of diffusion of that technology. Eric Verhoogen, an Associate Professor at Columbia’s School of International and Public Affairs who co-authored the study, told me that he and his colleagues started out by collecting “a whole lot of information on social networks.” “We were expecting the firms to adopt it very quickly,” said Verhoogen. But their experiment took an unexpected twist when they returned a year later to find that only five of the 35 firms had adopted the new technology—way fewer than they had expected. The economists asked factory leaders why, and they heard one answer more than any other: The workers on the factory floor didn’t like the new technology.
The problem boils down to different incentives. The cutters, who at most factories are paid by the piece, aren’t that concerned about their firm’s total output. They aren’t motivated to learn how to use a new piece of equipment, especially given that their production rate would probably drop during the training period. The new method also demanded a greater level of care from the workers. Tellingly, the first big factory to adopt the new technology was also one of the few that paid workers by the hour rather than by the piece.
“What we think was going on,” said Verhoogen, “Was that owners relied on their workers to tell them whether the technology was good, and the workers, figuring out that their wages might fall, were misinforming the owners.”
The researchers then designed a second experiment to further explore their hypothesis that a conflict of interest was preventing the companies from adopting the new technology. This time, they gave the workers a financial incentive to learn the new technology, offering one cutter per firm a reward of a month’s salary—the equivalent about $150— if they could become competent with the new equipment in a month. This time around, all of the cutters mastered the technology, and more than half the firms adopted it.
“The big idea I hope gets across,” said Verhoogen, “is that workers have to expect to share in the gains of innovation for innovation to be successful.”
This post has been updated.