05

Measurement problem: what can be considered as a new technology, and what is just an improved technology (e.g. mobile phones, computers)?

Declining use of technologies

• Delayed response time to information: not all potential adopters are informed immediately about the availability / market introduction of an innovation

• Learning from others: previous product experience plays an important role

• Desire to adapt to social norms: trend-following as classical example

• Heterogeneity

  • Heterogeneity in society is an important factor for explaining the long process of diffusion phenomena

  • Often taken into account to a limited extent in diffusion modeling

• J. Schumpeter

• epidemic theories

• Epidemic

  • As information about a new technology spreads across individuals, new people adopt the technology

  • Diffusion spreads like a disease

• Expected profitability of the innovation at firm level

• Communication-based model

• Network-consumption externality

  • Value of the network for subscriber increase with the number of adopters of the system

1. Diffusion of new technology takes time

2. Timing and rate of adoption differs among heterogeneous decision-makers / entities

3. Diffusion paths (of successful innovations) often follow a sigmoid path

• Selection

  • Competition between ‘innovative’ and ‘traditional’ firms

  • Diffusion as the relative market share of the two kinds of firms

• Imitation

  • Possibility of traditional firms giving up old technology in favor of new one

  • Diffusion as the rate at which adoption occurs

• Intra-firm, intra-industry (inter-firm) and inter-industry (inter-sectoral) diffusion

• National and international diffusion

• Geographical diffusion

• Product and process (and organizational / managerial) innovations

• Diffusion of multiple technologies

• Data availability

• Aggregate time-series or cross-sectional models (dependent variable: number of adopters)

• Disaggregated duration or hazard rate models (dependent variable: time until adoption by individual agents)

ROCCT

• Benefit to the marginal adopter from acquisition decreases as the number of adopters increases

• Acquisition costs fall over time in order to make adoption more profitable at any given time

• Firms acquire new technology —> Production costs fall —> affects industry prices and the profitability of further adoption

• Firms’ output decisions are being endogenized

  • benefit depends on a firm’s output

  • firm’s output level depends on other firms’ adoption behavior

• For decreasing acquisition costs, further adoptions are assumed to take place

• Non-using firm’s profits may fall over time if other firms adopt new technology

• The order of adoption has a positive effect on benefits through first-mover advantages resulting from e.g.

  • scarcity of suitable locations,

  • decreasing public acceptance and

  • increasing insurance premiums / safety regulation

• However, acting first might also have a negative effect due to e.g. technical improvements, learning effects and spillover effects (‘First-mover dilemma’)

• While adoption costs fall over time due to market prices and learning effects, adoption benefits depend on firms ́ characteristics such as:

  • location,

  • tax rate,

  • discount rate,

  • operating costs,

  • plant type and size, etc.

• “the time in the life-cycle of an innovation when it transitions from the introduction stage to the growth stage”

• Mathematically, this point corresponds to the time when the change in the derivative of the proportion of adopters reaches a maximum.

• It is, therefore, a useful macro-level indicator of the penetration of an innovation.