Technovation, 15(1) (1995) 11-24

An integrated approach to the

diffusion of technological innovation:
the non-manufacturing advanced
robotics field
Francesca Sgobbi
c/o Dipartimento di Economia e Produzione, Politecnico di Milano, Via Ponzio 34/c,
20133 Milano, Italy

Abstract

The search for new investment evaluation techniques is justified by the increasing gap between
the current scenario and the technological and environmental conditions where the 'traditional'
techniques have been developed. This is particularly true for 'embryonic technologies'--those
technologies so innovative that the actual number of their operative applications is still negligible.
It is important to evaluate the relevance of the technology since its embryonic stage springs from
the need to assess its impact over society as a whole.
A survey of economic literature underlines that neither traditional nor innovative techniques
are able properly to evaluate embryonic technologies: beyond the need for historic data, they
barely stress the role played by linkages between the expected benefits and the economic
participants involved in determining the success of the technology. An evaluation model is thus
developed which focuses on those elements. The way to build a set of indicators useful for
assessing the potential of embryonic technology and monitoring its evolution is also depicted.
An example related to an embryonic technology (advanced robotics) is discussed.

1. Introduction • the pervasiveness of their effects on both

The debate on evaluation techniques used to
assess the development possibilities of innovative
technologies gains strength from a correct appraisal
of the importance of their impact. This acquires
new relevance after the introduction of techno-
logies whose main characteristics are:
• the importance of factors not immediately
connected to monetary flows;
personal and space-time requirements;
• the concomitant growth of disturbance in the
global socio-economic context of their introduc-
tion.
Traditional appraisal approaches do not include
these new elements in their evaluation.
The less available and reliable the information
is, the lower the possibility of evaluating the
chances of success. This is the case for new

Technovation Vol. 15 No. 1 0166-4972/95/US$07.00 © 1995 Elsevier Science Ltd 11

F. Sgobbi
technologies characterized both by absolutely new
contents and by a small range of commercial
solutions because of the development stage where
most of the proposed applications still happen to
be. In this situation, the shortcomings of currently
disposable methodological tools seem to be large.
This work focuses on the appraisal of possible
uses for this kind of technology, referred to as
'embryonic technology'. The target of the work is
the development of a framework to evaluate
the impact of embryonic technologies over the
economic structure they affect. The framework
will consider both quantitative and qualitative
elements.
The paper is divided into four sections. The
first section deals with the unusual aspects of
embryonic technologies compared with those of
generic innovative technologies. The aim is to
stress the problems which cannot be solved by
traditional approaches, and to define the require-
ments which the proposed model should answer.
The next section reviews the main contributions
in the literature in order to show the state of the
art concerning the appraisal of radically new
technologies. The target is to assess the possibility
of extending existing approaches to embryonic
technologies. The third section is devoted to the
formalization of the proposed framework, the
advantages of which are underlined, while the last
section displays the possible application of this
methodology in the field of advanced robotics for
non-manufacturing activities. The chosen example
concerns the hospital-service robot PAM.
2. The problem
The paper deals with the probability of success
of those technologies (product and/or process)
characterized by:
• extremely new technological content, when
compared with the current state of the art;
• commercial exploitation limited to a reduced
set of products, since most conceived appli-
cations are in the project and prototype stages
12
because of the large number of technical sol-
utions still to be tested and standardized;
pervasiveness of the economic impact, which
spreads throughout the different stages of the
production chain and affects all the people
involved.
We define such technologies as embryonic to
underline the fact of their potential for many
applications. An example of such a technology is
advanced robotics, on which the last section of
this paper focuses.
Any innovative technology acquires tangible
economic relevance only when it is actually in use:
"the availability of a new product, or a new
process, confers neither private nor public benefit
before the innovation is adopted" [1]. This means
that the innovation shows its true relevance and
its impact on the socio-economic setting only when
it has been accepted. The need to quantify the
overall impact of the innovation in order to assess
its scope is underlined by Gibbons and Metcalfe
[2] and by Stoneman [3] as the main justification
for adoption/diffusion studies.
From this perspective, the problem of evaluating
the chances of a generic innovative technology
turns to the challenge of how to define and
measure the scope of the technology itself. The
first step is the selection of the proper tools to
ensure the most correct and complete appraisal.
The more uncertainty there is concerning possible
uses for the new technology, the more difficult
the choices appear.
Uncertainty about their prospects seems to be
the main feature of all technologies in the embry-
onic stage, and this involves both endogenous and
exogenous aspects. Evolutionary paths are not yet
defined, and meanwhile the 'absolute' or radical
novelty of the embryonic technology prevents
anyone from referring to past experience. This
situation stems from the lack of reliable historical
data, and therefore the impossibility of depicting
the current state of the art. Thus quantitative
methods cannot extrapolate future trends for either
the technology or its market.
Uncertainty increases when the technology is
T e c h n o v a t i o n Vol. 15 No. 1

introduced within a turbulent environment, where
structural changes are in progress. The uncertainty
of the external context thus sums up the ongoing
feature of applications. This results in increased
difficulty in identifying those factors which are
important in order to achieve the expected benefits.
The continuous updating of appraisal elements
becomes especially important in turbulent situ-
ations, in order to verify their relevance to future
constraints and opportunities. Moreover, linkages
between significant factors change over time, as
do their relative degrees of critical importance,
according to the state of the art and the evolution
of the general environment.
Pervasiveness represents one particular aspect
of many recently introduced technologies (e.g.
microelectronics, computer-integrated manufac-
ture (CIM), telecommunications, etc.). This
increases the uncertainty about the prospects of
an embryonic technology, since the consequences
of the innovation affect more stages of the
productive chain and modify the innovator's con-
nections within that chain, changing previously
existing balances. In this situation, any attempt to
assess the relevance of the new technology must
evaluate its impact over all the economic areas
involved. In fact, the probability of the innovator's
success increases when people in other related
areas can also expect some benefits from the new
technology. Analysis of other people's reactions
is always relevant for the innovator, since it shows
the possible areas of opposition to acceptance of
the new technology. It therefore becomes possible
to assess the suitability of actions designed to
eliminate or reduce the constraints outlined.
The pervasiveness of innovation itself underlines
the need to enlarge the set of factors to include
in the technology appraisal. This indication is
further stressed by the increasing importance of
intangible aspects (i.e., those not immediately
related to monetary flows) in assessing the actual
gain of expected costs and benefits. Both the
highlighted aspects acquire further relevance when
considered together with the growing turbulence
of the global context in which the innovative
technology takes place.
Technovation Vol. 15 No. 1
Diffusion of technological innovation
This brief analysis has outlined the main ques-
tions that a model aimed at the correct appraisal
of a technology in the embryonic stage should
answer. They can be summed up as:
• significance of the innovation for all the econ-
omic participants likely to be involved;
• determination of those factors acting as the
main constraints or incentives to development;
since they influence the occurrence of expected
costs and benefits the identification of their
mutual linkages also becomes relevant.
An appraisal of the scope of an embryonic
technology involves the choice of the tools used
by the decision maker to make up his (or her)
mind about the technology itself. A framework
able to identify the connections between important
aspects of the achievement of potential benefits
by the different participants involved becomes
really important after the evaluation has convinced
the decision maker to introduce the new tech-
nology. It actually enables him to adopt an 'active'
management of the technology development, since
it allows him
• to identify the potential improvements
(measured in terms of attainable benefits) conse-
quent to specific programmes undertaken by
the different people involved economically, and
to define the measurable targets which the
programme should aim at;
• to dynamically control the evolution of inter-
vention priorities in time.
3. Background
Both diffusion studies and adoption justification
methods deal with the process of introducing
an innovative technology within a certain socio-
economic setting. The two approaches differ in
the way they look at the problem, Diffusion studies
focus on impact dynamics, i.e. the trend of
adoptions in time, while adoption justification
routines are concerned with the effects of the
introduction of a particular application.
13
F. Sgobbi
In the case of embryonic technologies, the
employment of diffusion models seems unsatisfac-
tory to explain development trends. In fact, those
models implicitly assume that the techno-economic
feasibility of the innovation has already been
proved and that the number of single adoptions
which took place in the past is great enough
to generate a diffusion curve. This scenario is
misleading for an embryonic technology as defined
in the previous section, since the development
time span covers at least the very first part of the
logistic curve generally used to represent the
innovation diffusion process.
Analysis of recent trends seems worthwhile from
the point of view of a global approach to the
understanding of such phenomena. Indeed, it
allows the identification of further considerable
factors able to influence the way in which the
innovative technology spreads.1
The strategic approach, which refers to game
theory, has the advantage of explicitly considering
the weight of linkages among competitors in
determining the speed of diffusion. The same
factor is thus included among those affecting
the probabilities of success for the technological
innovation: "the decision to adopt is an eminently
individualistic choice for the company, which also
has to consider the strategic interdependencies with
competitors" [1]. The most recent developments of
the model attempt to overcome the main limits
of the original formulation by Reinganum [4],
introducing learning curves and further improve-
ments in technology following the first introduc-
tion. The strategic approach does not weigh the
role of uncertainty and, moreover, includes only
the innovator's direct competitors among the game
participants; i.e., it considers only horizontal
linkages.
Among epidemic models, the research is con-
cerned with analysing the role of information in
determining the level of risk faced by the adopter.
On the other hand, evolutionary models consider
the diffusion of a new technological pattern as the
result of selective processes which operate from
an initial variety of proposed solutions. Attention
has concentrated upon selection mechanisms, while
14
the recognition of the reasons leading to the initial
variety still presents an open problem, even if its
importance has been clearly assessed [2].
Diffusion models dealing with the interaction
between demand and supply acquire a particular
relevance, according to the aim of this study, since
they stress the importance of interconnections
between economic participants, even if the incor-
poration into formal models is limited by methodol-
ogical challenges. Stoneman [3] regards the intro-
duction of interaction between demand and supply
into diffusion models as a fundamental progress
of recent years: not only does it allow more
complete information about the determinants of
the diffusion process, but it also represents a first
step in relating diffusion both to research and
development and to industrial policy.
On the part of adoption studies, a growing
dissatisfaction towards 'traditional' investment
evaluation methods has been growing within econ-
omic literature since the beginning of the 1980s. 2
The need to develop different evaluation tech-
niques arises both from the appearance of new
technologies connected to automation of pro-
duction (among other factors) and from the
evolution of generic context. Adopters' require-
ments and traditional evaluation techniques are
moving apart because of the widening gap between
the environment in which traditional methodolog-
ies were suggested at first, and current scenarios,
characterized by greater complexity and growing
turbulence. Both phenomena have shown the
suitability of enlarging the set of factors included
in the evaluation process, together with their
connections. Gesternfeld and Berger [5] and
Kaplan [6] have already stressed the need to
consider factors that are not immediately quantifi-
able, as they play an important role in assessing
the novelty of technology compared to the state
of the art and environmental conditions. Lambrinos
and Johnson [7] provide an example of the strong
tie between appraisal methods and the evolution
of values within society. Increased sensibility
towards workplace safety and health acts so as to
include in the evaluation factors able to influence
its economic weight. The change of priority among
Technovation Vol. 15 No. 1

different expected benefits implies a different
emphasis on the factors related to the attainment
of the benefits themselves.
The solutions recently suggested in the literature
aim at increasing the completeness and thorough-
ness of appraisal methods. We can recognize two
main streams:
• quantitative approaches;
• strategic-analytical approaches.
'Modified discounted cash flow' methods [8] can
be mentioned among quantitative approaches,
as they attempt to increase the correctness of
traditional methods, including even the so-called
intangible aspects, into the assessment of the
economic value created through the investment.
Other suggestions can be found which try to give
a better evaluation of the impact of a new
technology through the analysis of linkages among
important elements. 3 Both options are useless for
technologies in the embryonic stage, since they
aim to quantify the economic value created,
thus needing available historical data and reliable
appraisals of future trends of the relevant variables.
Strategic-analytical approaches clearly point to
an integrated evaluation of both qualitative and
quantitative elements related to technology and
environment. Beyond the general methods
described in the surveys quoted, more particular
solutions stress the trend to refer to different
decision techniques at the same time. 4
The main feature arising from the survey of
recent literature is the consciousness that some
aspects deserve more attention nowadays than
they received in the past. Nevertheless, only a few
models explicitly consider the dynamics of linkages
among relevant elements and the change of their
relative critical weights in time.
Problems arise even on the side of the signifi-
cance of innovation for all the economic parti-
cipants potentially involved. The models suggested
in the literature mainly focus on benefits attainable
by the decision maker only, who generally coincides
with the buyer or user. 5 This seems to be a limit,
as even the decision maker's probabilities of
success increase when other people involved regard
Technovation Vol. 15 No. 1
Diffusion of technologica/ innovation
the introduction of the new technology as favour-
able. Under this enlarged perspective, it becomes
the decision maker's interest to evaluate the
benefits achievable by all the economic participants
concerned, i.e. to determine the whole significance
of the technology. 6
The study of technological innovation sources
(i.e. the people who develop the innovation and
the reasons for their behaviour) leads von Hippel
[9] to underline the appropriateness of actively
looking for the advantages connected to a techno-
logical innovation among the different economic
participants. His asserted thesis is that "the inno-
vators are those able to foresee in a reasonable
way benefits greater than those expected by non-
innovators". The only classes of functional sources 7
identified by von Hippel are producers, users and
suppliers of technology.
4. The model
The task faced by the proposed model is to
supply a helpful tool to evaluate a technology still
in the embryonic stage. It is not possible to
estimate future values of important variables on a
statistical basis, since the extremely innovative
content of such a technology prevents one from
referring to previous experience and currently
available data seem unreliable. The potential
adopter thus faces not risk, but uncertainty. The
suggested framework aims at reducing uncertainty
by enlarging the set of elements included in the
decision process.
The criterion used to verify the opportunity of
introducing an embryonic technology is the capacity
of the adoption, regarded as an investment, to
generate economic value for the decision maker.
The concept of created economic value indeed
represents a proper synthesis between the expected
benefits and costs of the adoption.
It has already been emphasized that the decision
process has to consider not only those elements
whose weight can be measured through monetary
cash flows, but also the so-called intangible aspects,
i.e. those difficult to measure. The concept of
15
F. Sgobbi

enlarged economic value (EEV) is introduced to
underline this perspective. It can be defined, for
every projected application and for every economic
participant interested in its development, as:
EEV,,, = f(R)
where EEVij is the enlarged economic value
generated by the ith application for the jth involved
economic subject (i = 1,2,...,n; j = 1,2 .... ,m),
and R is the vector of expected benefits and costs,
related to technology and/or environment:
R = [ra, r2 ..... rp]
As the lack and low reliability of available
information represent peculiar characteristics of
an embryonic technology, the exact quantification
of the economic value generated by the investment
seems an unattainable target. The model presented
here, the logical scheme of which is depicted in
Fig. 1, thus proposes a number of steps useful to
evaluate at least the sign, and only incidentally the
extent, of the EEV connected with an investment in
embryonic technologies---and the suitability of the
investment itself. The proposed approach develops
through two distinct stages:
• operational definition of the EEV;
• identification of a proper set of indicators to
(1) judge the suitability of the adoption.
The identification of expected costs and benefits
related to the introduction of the embryonic
innovation is the first step in defining the EEV.
From a formal point of view, this means identifying
the elements of the vector R as previously defined.8
(2) These elements arise from examining both the
considered technology and the environment in
which it is supposed to be introduced.
Referring to the formalization of a discounted
cash flow criterion such as net present value [10],
it is possible to give an operational definition for
the EEV as the sum of the suitably discounted
cash flows generated by the investment, considered
as if it were possible to convert all relevant
elements into monetary terms:
ffi,j(gl ..... Rm, t)
EEVij ,, (1 ~- r,) (3)

where f f i d ( R 1 , ..., R,,, t) represents the cash flow

TECHNOLOGY EXPECTED generated by the jth application in favour of the
AN/) ~--~ BENEFITS
EXTERNAL ENVIRONMENT ith economic subject during the tth year, and r, is
the discount rate.
The use of the NPV functional form does not
_~ EEV = f(13)
aim, in this case, to quantify the economic value
created by the embryonic technology investment,
i since R contains qualitative elements as well. It is
INDICATORS
SYSTEM
justified by formal needs only: indeed, the additive
structure allows a high degree of completeness if
COMPARISON BETWEEN
the single terms can be regarded as independent.
EXPECTED/ACTUAL ---~ The next step is to isolate the relevant factors,
INDICATORS
which arise from an examination of the socio-
I technical context entered by the new technology,
beyond the analysis of characteristics of the
ADOPTION/ eventual benefits. 9 This search has a double
ACTIVE POSTPONEMENT purpose: first, to identify the most critical factors
and, second, to define the connections between
REJECTION/
PASSIVE POSTPONEMENT different benefits. The identification of factors
affecting the expected benefits answers the need
Fig. 1. The proposed model scheme. to enlarge the set of elements included in the

16 Technovation Vol. 15 No. 1


evaluation. The links between benefits arise from
an examination of the impact which every single
factor causes on the expected distribution of
distinct advantages.
If we indicate the vector of relevant factors as
X = [x,, x2, ..., Xh] (4)
every generic cost or benefit Rk can be expressed
as a suitably constructed function referring to a
subset of X:
R~ = gk(xl, x2 . . . . . xr) (5)
where x~, x2. . . . . xr belong to X.
By substituting (5) within (3), the EEV is now
defined as:
fft,l(gl . . . . . gin, t)
EEV, j ,, (1 + r,) (6)
This EEV coincides with the so-called modified
DCF criteria when all the important factors are
quantifiable, their mutual interactions are well
known and even their present and future values
are estimable. But the peculiarities of embryonic
technologies prevent this from coming true. A set
of indicators is then referred to in order to
operatively use the values of eq. (6), i.e. to
evaluate the suitability of adoption. The indicators
should be able to estimate, qualitatively or quanti-
tatively, the present situation and to monitor its
evolution over time.
An array of parameters can be identified through
the 'explosion' of the relevant factors. ~° The
different indicators are made up by the parameters
themselves, or by proper aggregations. H It should
be possible to assess the defined indicators, i.e.
to measure them or at least to forecast their
trend, ~2 and to monitor their evolution as well.
The formalization of the EEV, written for every
involved participant, is thus used to build up a
system of indicators able to depict the current
situation and to monitor its evolution. Both general
and specific indicators can be recognized within
the set: the former kind is useful for all the
applications within a certain area, the latter
concerns the indicators peculiar to a specific
implementation.
Technovation Vol. 15 No. 1
Diffusion of technological innovation
'Pseudo-formalization' of the EEV, written for
every economic participant, allows the decision
maker to turn his/her mind towards the selection
of capital budgeting. Even if a global appraisal of
the potential economic value seems unlikely, it is
possible to verify whether the parameters related
to critical factors reach the previously defined
hurdle levels. It should be noted that the EEVs
defined for people other than the decision maker
become additional indicators. Their relevance is
weighted by the subjective importance given to
the various economic entities.
When the choice results in adoption of the
innovative technology, or even in the definition of
incentive measures aimed at further development
('active postponement'), the understanding of criti-
cal factors and their links allows measurable targets
to be set. The goals of the defined improvements
are thus defined and, since they are measurable,
they can be controlled later.
A particular characteristic of the proposed model
is its suitability to monitor a dynamic situation
such as that of a technology still in the embryonic
stage, developing within a turbulent context.
Indeed, the relative relevance of the different
expected benefits shifts in time, because of changes
both in the technological state of the art and in
the external environment. The same happens with
the relative relevance of critical factors. Both these
phenomena can be monitored through the set of
indicators, which can be updated by adding new
parameters and deleting the no longer meaningful
ones.
5. Non-manufacturing robotic
applications
By 'advanced robotics' we mean those robots
able to collect from the external environment the
data needed to operate in ill-structured surround-
ings, i.e. in deterministically unknown settings.
Their field of application is represented by non-
recurring activities, mainly occurring when the
important characteristics of the working environ-
ment cannot be forecast in advance with certainty.
17
F. Sgobbi
The adoption of advanced robots is thus justified
by the need to export automation even outside
structured manufacturing activities.
The introduction of advanced robotics is parti-
cularly meaningful when:
• traditional mechanization and automation pre-
vent the enterprise from achieving the desired
level of effectiveness and efficiency, thus they
are not currently in use;
• at the same time, the results obtained through
the usual processes, both manual and mechan-
ized, are regarded as unsatisfactory.
The analysis of constraints and opportunities for
the development of advanced robotics has been
the object of research within the Italian National
Research Council's 'Progetto Finalizzato Robot-
ica'.
Advanced robotics relies upon a set of innovative
technologies (machine vision, autonomous navi-
gation, adaptive object manipulation, 'friendly'
interaction with users, etc.) which can be called
embryonic, since the technical choices for con-
verting them to practical solutions are not yet
defined. This scenario is due to the need of both
further developing the innovative technologies
beyond the current state of the art, in order to
increase their effectiveness and efficiency, and
facing the problem with a multi-disciplinary
approach. Moreover, since the main areas of
application are not concerned with manufacturing,
they result in being far away from those fields
where industrial robotics first developed. The
technological uncertainty amounts to both geo-
graphical and industrial disconnectedness of the
market faced by advanced robotics.
The relevance of innovative technologies used
within advanced robotics cannot be properly evalu-
ated through the use of 'traditional' quantitative
methodologies, because of the relevance of intan-
gible aspects. The applications that are identified
are projected not only to increase the productivity
of operations through automation--improved
safety levels for users, better quality of the product
or service supplied by the robot, environmental
safeguards are often quoted as expected benefits.
18
The listed elements are certainly able to create
value for the economic participants involved, as
they answer to needs actually present within the
social context, but they are not immediately
quantifiable in monetary terms. Beyond this, the
totally innovative content of advanced robotics
prevents one from directly comparing either the
experimental or the operational applications with
the previous state of the art: it is not possible
to forecast any evolution referring to previous
experience.
The depicted scenario makes it clear that neither
the factors affecting the success of the technology
nor their interconnections are clearly defined yet.
Indeed, advanced robotics represents a proper
field to test the feasibility of the proposed approach
to evaluate the relevance of embryonic techno-
logies.
It may now be useful to illustrate the method
through an example. The proposed example con-
cerns PAM (patient assistant for mobility), a
robotic mobile platform projected to adaptively
handle bedridden patients within a hospital. PAM
is developed by Armstrong Projects Ltd within
the UK Department of Trade and Industry's
Advanced Robotics Initiative. A comprehensive
description of PAM is given by Finlay [11,12].
The witnessing of a similar project by the Japanese
company Sanyo Electric Ltd is reported in [13].
PAM, which is now undergoing technology
demonstrations, aims to substitute the nurses in
the handling of bedridden patients, since it is able
to lift the patient from the bed and to transport
him/her to the desired area while keeping the
patient in the most suitable position. The nurse
pilots the robot, but lets it decide about optimizing
the path and avoiding collisions.
The classes of economic participants affected by
the introduction of a similar robot are:
• suppliers;
• buyers;
• direct users, which we can further divide into
• patients,
• nurses;
• public administration.
T e c h n o v a t i o n Vol. 15 No. 1

Expected costs and benefits related to the
introduction of the robot can be identified for
each of these subjects. In the following example,
we focus upon the buyer's choice. This role can
be played by the management of either a public
or a private hospital facing the decision to adopt
PAM. The task performed by the potential buyer
becomes quite important in this case, as she/he is
directly involved in the economic transmission
associated with the adoption, i.e. the purchase of
the robot.
Two phenomena currently characterize the
health service in industrialized countries, where
the adoption of a hospital robot seems reasonable.
The growing demand for nurses is connected to
the general increase in population age, which
means more medical treatment for longer periods.
This trend joins a parallel reduction in the avail-
ability of nurses. The need to handle bedridden
patients, which usually requires the presence of
more assistants, gets more and more frequent with
the growth of the mean age and weight of the
hospital population. The introduction of a robot
able to perform such a task, repetitive and yet
dangerous for both hospital personnel and patients
[12], looks like a proper solution to the need both
to reduce the hazard of accidents and to amend
the lack of nurses, who can thus be free to attend
to other tasks that cannot yet be automated.
Since only one nurse is now needed to control
the robot and to perform the whole task, the
simplification of operational flow, together with
the reduced complexity of required skills, appear
as further benefits related to the adoption of
PAM. It is possible to increase the work rate,
thus the productivity, of the involved resources.
The elements depicted highlight the possibility of
delivering a better quality service to the patients,
as well as increasing the interest of the medical
personnel in their job. The simpler operational
flow even implies a fall in the direct costs of
patient handling as a consequence of the reduced
number of nurses needed for each transfer.
Nevertheless, the achievement of the expected
benefits involves some incremental costs: these
are due to the starting investment and to the
Technovation Vol. 15 No, 1
Diffusion of technologica/ innovation
costs of operation and maintenance. The starting
investment concerns the purchase of the robot and
the revision of the operational flow. These two
aspects interlock, because the optimal number of
robots varies according to organizational choices.
The reduction of incremental costs depends
upon the buyer's interactions with other people
affected by the new technology. The initial invest-
ment will vary according to public administration
incentive policy, while the costs connected with
the introduction of PAM within the work flow
are affected by nurses' and patients' reactions.
Moreover, the upkeep depends upon the supplier's
policy, not only because robot reliability conditions
the frequency of the maintenance periods, but
also because robot availability depends upon the
service level chosen by the supplier himself. From
this point of view, the presence of the robot
increases the buyer's dependence on the external
environment.
Costs and benefits expected from PAM adoption
have been summarized to underline the links
between different advantages and between the
behaviours of different involved economic parti-
cipants. The Appendix offers a possible formaliz-
ation of the EEVs associated with the introduction
of PAM into a hospital, together with a set of
indicators aimed at monitoring the present state
of the art and its evolution.
As a proxy, we can regard as independent the
contribution of every term to the creation of
economic value. In this case, a possible formaliz-
ation of the EEV created by PAM for the hospital
adopting the technology can be written as:
Cur,)*n°r]
EEV = -Pr*n°r - CAA +
+ ~ (n'(1 n)*CP,
it J/- r) t
A detailed explanation of the symbols used is
supplied in the Appendix. The present target is
to highlight how the various addenda embody
buyer's costs and benefits as earlier identified.
The first two terms represent the starting invest-
ment, since (Pr*n°r) represents the cost of the
19
F. Sgobbi
robots while the second term represents the costs
of introducing the robots within the work flow.
The third term represents the impact of the
adoption on the hospital's operational cost struc-
ture, since it is the incremental difference between
cash inflows and outflows due to the presence of
the robots. The last t e r m represents the capability
of the investment to reduce the c o m m i t m e n t s
connected not only with operational m a n a g e m e n t ,
but also with undesirable events such as handling
accidents.
The terms featured in this equation refer to
both tangible and intangible elements. For
instance, C A A embodies the expenses due to the
modifications in the r o b o t ' s working environment.
It includes both m o n e t a r y costs, such as those
resulting from the physical modifications of the
surroundings, and definitely qualitative elements,
such as nurses' and patients' reactions to the
introduction of the robot.
In the Appendix (Table A1) a set of possible
indicators is suggested. These can be used to
define the importance and the mutual critical level
of the different factors affecting the achievement
of the expected advantages.
Acknowledgements
I wish to thank Gian Carlo Cainarca and
Giovanni Azzone for their valuable suggestions
and comments. O f course, I take the responsibility
for every mistake or inaccuracy.
This work has been developed within the frame-
work of the 'Progetto Finalizzato R o b o t i c a ' , spon-
sored by the Italian National Research Council.
Notes
Surveys of recent contributions to diffusion studies
are provided by Stoneman [3] and Gruber [1].
2 A survey of the main economic justification tech-
niques traditionally used even for innovative technologies
can be found in [14]. Beyond the analysis of merits and
faults of traditional approaches, surveys of recent
contributions in this area can be found in [15-17].
20
3 Jang and Lin [18] estimate the reduction of direct
labour hours resulting from the introduction of a generic
innovative technology. Schlesinger and Imany [19]
search for possible non-linear correlations between the
parameters affecting the performance of industrial
robots.
4 Examples are given in [20--23].
5 Cowan [24] proposes a model which departs from
this trend, as the economic subject it refers to is a generic
central authority facing two different technologies of
unknown merit. The model aims to provide the central
authority with a decisional tool able to reduce the
danger of favouring the worse technology.
6 The innovator eager to introduce the new technology
should consider its effects on both horizontal and vertical
relationships. The former aspect becomes relevant
mainly when network externalities are present, i.e.
when the success of the technology is favoured by
diffusion among competitors [1]; an example is provided
by the importance of defining new common standards.
7 This term refers to participants relating to the
innovation through a particular functional role.
8 For example, expected benefits can be process
waste reduction, decrease in lead times, observance of
environmental regulations, increase in safety and health
of the workplace, etc. Additional costs implied by the
introduction of new technology are exemplified by
changes in the existing work flow, training of employees,
etc.
9 For example, consider a technology that allows a
better safeguard of workers' health. The factors affecting
the value of the potential advantage can be identified
as variation in medical and insurance costs, increased
productivity of the work force, higher quality, better
external image of the adopter, and so on.
10 For example, parameters such as 'mean number of
accidents per year', 'mean cost of each accident',
'frequency of different professional diseases', .... affect
the factor 'medical expenses variation'. All the para-
meters have to be evaluated for both the traditional
and the innovative technology.
1~ For instance, a meaningful 'aggregated' indicator
could be the trend of the ratio between the mean
number of accidents happening with and without the
new technology.
12 It is not possible to measure quantitatively a
parameter such as 'regulation trend', considered as
indicative of an important factor such as 'allowed
pollution levels'. It is, however, possible to give a
qualitative estimation through the use of degrees such
Technovation Vol. 15 No. 1

as 'stationary', 'towards stiffening of current regulations',
etc.
References
1 H. Gruber. La teoria delradozione delle innovazioni
tecnologiche: una rassegna dei contributi recenti.
Economia Politica, IX(l) (April 1992).
2 M. Gibbons and J.F. Metcalfe. Technological variety
and the process of competition. Paper presented at:
Conference on Innovation Diffusion, Venice, 17-21
March 1986.
3 P. Stoneman. Technological diffusion: the viewpoint
of economic theory. Ricerche Economiche, XL(4)
(Oct.-Dec. 1986).
4 J.F. Reinganum. On the diffusion of new technology:
a game theoretic approach. Review of Economic
Studies, 48 (July 1981).
5 A. Gerstenfeld and P. Berger. A model for economic
and social evaluation of industrial robots. Proceedings
of the 12th ISIR, Paris, 9-11 June 1982.
6 R.S. Kaplan. Must CIM be justified by faith alone?
Harvard Business Review (March-April 1986).
7 J. Lambrinos and W.G. Johnson. Robots to reduce
the high cost of illness and injury. Harvard Business
Review (May-June 1984).
8 G. Azzone and U. Bertele. Techniques for measuring
the economic effectiveness of automation and manu-
facturing systems. Control and Dynamic Systems, 48
(1991).
9 E. yon Hippel. The Sources of Innovation. Oxford
University Press, Oxford and New York, 1988.
10 J.J. Clark, T.J. Hindelang and R.E. Pritchard.
Capital Budgeting--Planning and Control of Capital
Expenditures. 3rd Edition, Prentice-Hall, Englewood
Cliffs, NJ, 1989.
11 P.A. Finlay. Medical robotics--why, what and when.
Industrial Robot 16 (March 1989).
12 P.A. Finlay. PAM: a robotic solution to patient
handling. Industrial Robot, 19(3) (1992).
13 J. Hoiligum. Japanese robotics displayed at Science
Museum. Industrial Robot, 18(4) (1991).
14 R.E. Terry, R.A. Branting and D.L. Whitman. A
critical review of project analysis techniques. In:
H.R. Parsaei, W.G. Sullivan and T.R. Hanley (eds.).
Economic and Financial Justification of Advanced
Manufacturing Technologies. Elsevier, 1992.
15 J.R. Meredith and N.C. Suresh. Justification tech-
niques for advanced manufacturing technologies.
Technovation Vol. 15 No. 1
Diffusion of technological innovation
International Journal of Production Research, 24(5)
(1986).
16 J.P. Lavelle and H.R. Liggett. Economic methods
for evaluating investments in advanced technologies.
In: H.R. Parsaei, W.G. Sullivan and T.R. Hanley
(eds.). Economic and Financial Justification of
Advanced Manufacturing Technologies. Elsevier,
1992.
17 S. Kolli, M.R. Wilhelm, H.R. Parsaei and D.H.
Liles. A classification scheme for traditional and non-
traditional approaches to the economic justification of
advanced automated manufacturing systems. In:
H.R. Parsaei, W.G. Sullivan and T.R. Hanley (eds.).
Economic and Financial Justification of Advanced
Manufacturing Technologies. Elsevier, 1992.
18 J. Jang and R.C. Lin. Estimating the reduction in
labor hours due to a new technology under uncertain
demand. International Journal of Production
Research, 29(2) (March 1993).
19 R.J. Schlesinger and M.M. Imany. Statistical investi-
gation of robot performance specifications. Human
Systems Management, 6 (1991).
20 K. Knott and R.D. Getto. A model for evaluating
alternative robot systems under uncertainty. Inter-
national Journal of Production Research, 20(2)
(1982).
21 K. Knott, B. Bidanda and D. Pennebaker. Economic
analysis of robotic arc welding operations. Inter-
national Journal of Production Research, 26(1)
(1988).
22. J. Sarkis. The evolution to strategic justification of
advanced manufacturing systems. In: H.R. Parsaei,
W.G. Sullivan and T.R. Hanley (eds.). Economic
and FinancialJustification of Advanced Manufactur-
ing Technologies. Elsevier, 1992.
23. G. Barbioli. A new method to evaluate the specific
and global advantage of a technology. Technovation,
10(2) (1990) 73-93.
24 R. Cowan. Tortoises and hares: choice among
technologies of unknown merit. The Economical
Journal (July 1991).
APPENDIX
The proposed formalization of the E E V with
regard to the adoption of P A M by a hospital
structure is repeated below in order to give a
detailed explanation of the symbols used:
21
 F. Sgobbi

suggested: these can be used to define the import-

EEV = -Pr*n°r - CAA + ~ [(Ci, - Curr)*n°r]
ance and mutual critical level of the different
it ~ ~- r)}-
factors affecting the achievement of the expected
+ ~ (n' - n)*Cpl advantages.
It (1- _~ ~)t As well as for the buyer, a 'formalization' of
the enlarged economic value has been written for
where
every identified participant. The formulae result
EEV = enlarged economic value from the analysis of expected costs and benefits.
Pr = robot price They do not claim mathematical rigour, but are
n°r = number of purchased robots intended as a starting point to the identification
CAA = cost of setting up the robot's work of those parameters able to affect the achievement
environment of aimed-for advantages. This is the first step in
Cit = change in direct work costs building up a set of indicators useful for a complete
Curt = robot functioning/upkeep costs in year t appraisal of the relevance of the application.
n -- mean number of handling accidents after
robot adoption
Cpi = mean cost per accident sustained by the A1. Supplier
buyer
N -- robot life EEV = - I +
(Fr, Cr,) + ,~ (Rm,- Cm,)
r = annual discount rate. ,, (l+r) t x' (1 + r)'
Primed symbols correspond to the symbols listed
where
above when the robot is not in use.
In Table A1 a set of possible indicators is EEV -- enlarged economic value
T A B L E A1. A set of possible indicators to assess the relevance of P A M

Relevant factors Indicators

Pr = robot price trend of public health subsidies (politics)

standardizanon level of components
price of alternative equipment
CAA = costs to fit the environment where the robot works
n°r = number of purchased robots mean number of training hours
number of tasks under nurse's direct control
quality of tasks under nurse's direct control
Cit = change m direct work costs absenteeism percentage
annual lost work hours due to handling accidents
annual hours of overtime work
change in number of employees due to adoption of robot
Cur, = robot functioning/upkeep costs in year t robot reliability
alternative equipment reliabihty
robot availability
alternative equipment availability
n = mean number of handling accidents after adoption of robot robot reliability
robot availability
annual lost work hours due to handling accidents
mean patient age
mean patient wetght
bedridden patient percentage

22 Technovation Vol. 15 No. 1

 Diffusion of techno/ogical innovation

I = investment needed to enter the new EEV = enlarged economic value (for every hos-
market pital treatment)
Fr, = new product income in year t gg = m e a n n u m b e r of hospital in-patient days
Cr, = new product direct costs in year t after adoption of robot
Rmt = incomes related to modifications/mainte- Cd = daily cost of hospital treatment
nance in year t p, = probability of handling accident after
Cmt = costs related to modifications/mainte- adoption of robot
nance in year t C, = cost of handling accident sustained by
N = investment life the patient
r = annual discount rate. Sd = m o n e t a r y measure of greater satisfaction
of patient
A2. Nurses Primed symbols correspond to the robot not being
in use.
N A SALm/
EEV Pi*z~W (1 + rm) t
It
A4. Public administration (PA)
~ &SALt
R T,
+ (1 - p ~ ) * (1 + r) t - - +
1t E E V = - Sr*n°tr + (1 + r) t
R t
~ ( 1 + r)'
Et , (n' - n)*C,
+ /_,
V (l+r)t (p'' p,)+S,

where where
EEV = enlarged economic value EEV = enlarged economic value
Pl -- dismissal probability due to adoption Sr = subsidy per robot issued by PA
of robot n°tr = total n u m b e r of robots purchased
& S A L m , = monthly wage before adoption of Pt = pension contributions spared in year t
robot T, = fiscal incomes lost in year t
& S A L t = annual wage after adoption of robot n = mean n u m b e r of handling accidents after
C, = mean work accident cost sustained by adoption of robot
the worker in year t mean cost of handling accident sustained
p, -- work accident probability after adop- by PA
tion of robot M mean life left to the nurse substituted
S, = m o n e t a r y measure of greater satisfac- by the robot
tion of worker R = mean n u m b e r of years to retirement for
r,,, = monthly discount rate the nurse substituted by the robot
r = annual discount rate. N =
m e a n robot life
Primed symbols correspond to the robot not being r = annual discount rate
in use. Primed symbols correspond to the robot not being
in use.
A3. Patient
Franeet~m Sgobbi was born in Milan in 1968 and studied at
E E V = (g-g' - g-g) * Ca + (P', -- P,) * C, + Sd the Politecnico di Milano, where she gained her degree in
Industrial Engineering in 1993. She is currently a PhD student
where at the Economics and Production Department of the same

Technovation Vol. 15 No. 1 23

F. Sgobbi

university. Her research interests concern the impact of sponsored by CNR (the Italian National Research Council),
automation on work organization. she has written a report dealing with the opportunities and
Within the framework of the 'Progetto Finalizzato Robotica', constraints currently faced by advanced robotics.

24 Technovation Vol. 15 No. 1