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Energy Efficiency in Small and Medium-Sized Manufacturing Firms: Order Effects and the Adoption of Process Improvement Recommendations

Author

Listed:
  • Suresh Muthulingam

    (Samuel Curtis Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853)

  • Charles J. Corbett

    (Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095)

  • Shlomo Benartzi

    (Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095)

  • Bohdan Oppenheim

    (Frank R. Seaver College of Science and Engineering, Loyola Marymount University, Los Angeles, California 90045)

Abstract

In many manufacturing operations, profitable energy efficiency opportunities remain unexploited. Although previous studies have tried to explain the underinvestment, we focus on how the way in which a portfolio of opportunities is presented in a list affects adoption decisions. We use information on over 100,000 energy-saving recommendations made to more than 13,000 small and medium-sized manufacturing firms under the Industrial Assessment Centers program of the U.S. Department of Energy. We find that adoption rates are higher for initiatives appearing early in a list of recommendations. This sequence effect is consistent and large: simply moving a recommendation one position lower has the same effect on average as increasing up-front implementation cost by at least 17% from the average value. Given this impact of sequence on adoption of individual recommendations, we utilize variations within our data to examine how various sequencing approaches affect adoption at the portfolio level. Sequences in which recommendations are listed from best to worst payback achieve higher potential energy savings given the investments in energy efficiency made by the firms. We also observe a choice overload effect at the portfolio level, but the magnitude of this effect is small.

Suggested Citation

  • Suresh Muthulingam & Charles J. Corbett & Shlomo Benartzi & Bohdan Oppenheim, 2013. "Energy Efficiency in Small and Medium-Sized Manufacturing Firms: Order Effects and the Adoption of Process Improvement Recommendations," Manufacturing & Service Operations Management, INFORMS, vol. 15(4), pages 596-615, October.
    • Handle: RePEc:inm:ormsom:v:15:y:2013:i:4:p:596-615
    DOI: 10.1287/msom.2013.0439
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    References listed on IDEAS

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