The Diffusion of a Process Innovation with Gently Declining Production Cost

被引：0
作者：
Chen Q. [1 ]
Liu Y. [2 ]
机构：
[1] Department of Economics and Finance, School of Business and Technology, East Tennessee State University, Johnson City, TN
[2] Department of Mathematics, East Tennessee State University, Johnson City, TN 37614
来源：
Journal of Industry, Competition and Trade | 2011年 / 11卷 / 2期
关键词：
innovation; technology diffusion;
D O I：
10.1007/s10842-009-0064-3
中图分类号：
学科分类号：
摘要：
This paper develops a model to investigate the diffusion process of a cost-reducing process innovation within an industry. Two factors drive the diffusion process. First, the gradually declining production cost with the innovation makes the adoption of the innovation more profitable, and consequently motivates more firms to adopt it over time. Second, the switching from old technology to new technology requires suitable organizational knowledge, which is costly to acquire. This tends to slow down the diffusion. The interaction between the two factors determines the path and the speed of the diffusion process. The model is able to explain three observations in technology diffusion, including (1) the S-shaped diffusion path; (2) the rejection of an innovation by some firms; and (3) unprofitable technology adoption. A policy implication of the model is that, through subsidizing the transfer of relevant knowledge from adopters to non-adopters, government can facilitate the diffusion of innovations and improve social welfare. © 2009 Springer Science+Business Media, LLC.
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页码：109 / 129
页数：20
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