Inter-firm knowledge diffusion, market power, and welfare

We propose an infinite-horizon quantity-setting differential game with learning spillovers and organizational forgetting to analyze the optimal management decisions affecting the evolution of the stock of know-how, and, in turn, the dynamics of productive efficiency. Specifically, we study the long run impact of inter-firm knowledge diffusion on market power, i.e. the ability of a firm to raise the price above the marginal cost, and welfare. We consider two types of processes through which knowledge is acquired: (i) passive learning, or learning-by-doing, where managers do not actively invest in information and (ii) active learning, or learning-by-investing, where managers acquire new and additional information through specific investments in human capital. We show that: under (i), knowledge diffusion reduces market power; under (ii), knowledge diffusion reduces market power as long as learning spillovers are sufficiently important. From a welfare viewpoint, we also show that: under (i), knowledge diffusion is always welfare-enhancing; under (ii), weak spillovers are required in order for knowledge diffusion to be welfare-enhancing.     

The diffusion of policy innovations -an experimental investigation

What causes a government to adopt a new program or policy? Despite a large number of empirical studies available to date, the relative importance of various determinants remains obscure because of difficulties of statistical identification. We present an experimental setting to study the diffusion of policy innovations in the laboratory. Our approach discriminates between experimentation, experience, and emulation as determinants of policy adoption. The policy innovation we study is an internalization tax to mitigate a local market externality. Our results demonstrate the importance of information about innovations in other states in the diffusion of policy innovations.JEL Classification: C9, D7, H7Correspondence to: Rupert SausgruberWe gratefully acknowledge financial support by the Austrian National Bank (Jubiläumsfonds under project no. 9134) and the Austrian Science Fund (FWF under project no. P17029). We are grateful for comments by Ernst Fehr, Simon Gächter, Simon Hug, Arno Riedl, Frans van Winden and seminar participants at the Universities of Amsterdam, Erfurt, and St. Gallen.     

Innovation adoption and diffusion when there are competing innovations

Firms face a choice between two innovations without knowing which of the two is better. Each firm has a prior that one of the innovations is better, which is updated by Bayes rule as trials with the innovations are made. A simple decision rule indicating which innovation should be tried, given any posterior, is derived and used to define an expected diffusion curve for the better innovation. This curve has the commonly observed ogive shape, even in the absence of any external demonstration effect, when the distribution of firm priors belongs to a general class.     

Agent-based modeling of the diffusion of environmental innovations — An empirical approach

This paper presents an agent-based model of the diffusion of water-saving innovations. The empirical foundation of this model is a study, which was carried out for that specific purpose. As an example case, the diffusion of three water-related innovations in Southern Germany was chosen. The model represents a real geographic area and simulates the diffusion of showerheads, toilet flushes, and rain-harvesting systems. Agents are households of certain lifestyles, as represented by the Sinus-Milieus® from commercial marketing. Agents use two different kinds of decision rules to decide upon adoption or rejection of the modeled innovations: A cognitively demanding deliberate decision rule and a very simple decision heuristic. Thus, the model integrates concepts of bounded rationality. The overall framework for decision-making is the Theory of Planned Behavior, which has been elaborated using innovation characteristics from diffusion research. The model was calibrated with empirical data stemming from a questionnaire survey and validated against independent data. Scenarios for the nearer future show that water-saving innovations will diffuse even without further promotion, and different promotion strategies that relate specifically to both innovations and lifestyles can be pointed out.     

Some aspects of an analytical framework for studying the diffusion of organizational innovations

The objective of this paper is to explore the extent to which the more recent literature on innovation and decision, with a prime focus on technical innovations, can contribute to a useful analytical framework for studying the diffusion of organizational innovations. We review that literature, compare the intrinsic features of technical and organizational innovations, and explore what these differences may mean for an eventual analytical framework specifically developed for studying organizational innovations. We conclude that the received 'innovation' literature has a great deal to offer but that some modifications are required. In particular, we suggest that the role of factors 'inside' the non and of non-market mechanisms for transfer of organizational innovations needs special emphasis.     

Product and process innovations in the life cycle of an industry

Filson [Rev. Econ. Dyn. 4 (2001)] uses industry-level data on firm numbers, price, quantity and quality along with an equilibrium model of industry evolution to estimate the nature and effects of quality and cost improvements in the personal computer industry and four other new industries. This paper studies the personal computer industry in more detail and shows that the model explains some peculiar patterns that cannot be explained by previous life-cycle models. The model’s estimates are evaluated using historical studies of the evolution of the personal computer industry and patterns that require further model development are described.     

The structure of inter-industry systems and the diffusion of innovations: The case of Spain

This paper focuses on the role of inter-industrial structures and the position of economic sectors in them for the diffusion of knowledge and innovation. Network Theory and Social Network Analysis have been applied to analyze the structure of the Spanish Input–output system and its evolution over a thirty-five-year period. The structural analysis conducted tests the existence of a Scale-free topology and also includes the identification of sectors acting as hubs or super-spreaders, which make up the core of the system. Scale-free networks correspond to structures that allow for faster and more efficient diffusion processes that are enhanced when initiated in hubs. As a concluding remark, this paper puts forward a proposal for interventions to attain a higher incidence in the national innovative capacity and in the development process.     

Modelling a dynamic market potential: A class of automata networks for diffusion of innovations

Innovation diffusion processes are generally described at aggregate level with models like the Bass Model (BM) and the Generalized Bass Model (GBM). However, the recognized importance of communication channels between agents has recently suggested the use of agent-based models, like Cellular Automata. We argue that an adoption or purchase process is nested in a communication network that evolves dynamically and indirectly generates a latent non-constant market potential affecting the adoption phase.Using Cellular Automata we propose a two-stage model of an innovation diffusion process. First we describe a communication network, an Automata Network, necessary for the “awareness” of an innovation. Then, we model a nested process depicting the proper purchase dynamics. Through a mean field approximation we propose a continuous representation of the discrete time equations derived by our nested two-stage model. This constitutes a special non-autonomous Riccati equation, not yet described in well-known international catalogues. The main results refer to the closed form solution that includes a general dynamic market potential and to the corresponding statistical analysis for identification and inference. We discuss an application to the diffusion of a new pharmaceutical drug.     

Lead markets and regulation: a framework for analyzing the international diffusion of environmental innovations

Environmental regulations are often intended to stimulate the generation and adoption of eco-efficient innovations. An important argument in the public debate is also the creation of new markets for environmentally benign products, processes and services in other countries and the generation, as a result, of export opportunities for the pioneering country (lead markets). Research on lead markets has not, however, focused on environmental innovations to date. We therefore extend the lead market model to environmental innovations and take particular account of the peculiarities of such innovations, in particular, the public good character of environmental benefits and the role of regulations. This approach is applied to two case studies: wind energy and fuel-efficient passenger cars. In both cases, the innovation was initially adopted in one country. Other countries subsequently adopted the same innovation design favored by the lead market which, in turn, developed into a large exporter in the wind generation and car industries, respectively. We discuss the regulations employed and the reasons for the international success of the innovations induced by them. Our findings demonstrate that when supported by global demand or regulatory trends, strict regulation results in the creation of lead markets. Finally, we provide recommendations on how our model could be used for further research and in the development of a coordinated environmental and innovation policy.     

The long-run dynamics of product and process innovations for a multi-product monopolist

This paper introduces the dynamical framework which combines product and process innovations. The model contributes to the theoretical literature on innovations in two ways. First, it permits for the simultaneous dynamics of both types of innovations which is rarely considered in the literature. Second, the products being generated by the innovations are heterogeneous in their investment characteristics. This allows for the formation of the dynamic interdependency between both types of innovations. As a result, the steady-state levels of process innovations for each product are different and influence the dynamics of product innovations in turn.     

The process of technology evolution : Multitechnology innovations as the driving force

Technological innovations are the substance of technology and the drivers of its evolution. This process was studied by analyzing the US patent data base, getting information on types of innovation and on their trends.It was found that the evolution of a technology depends upon its annexing multitechnology innovations. Ascending technologies utilize wide-range innovations, while mature technologies utilize narrow-range innovations. The findings are summed up in a model that shows the life cycle of a technology, from emergence to maturity.The model can be applied at a laboratory level, at a firm strategy level, as well as at the national level. Some examples are presented to illustrate applications.     

Asymmetries in bid and ask responses to innovations in the trading process

This paper proposes a new approach to jointly model the trading process and the revisions of market quotes. This method accommodates asymmetries in the dynamics of ask and bid quotes after trade-related shocks. The empirical specification is a vector error correction (VEC) model for ask and bid quotes, with the spread as the co-integrating vector, and with an endogenous trading process. This model extends the vector autoregressive (VAR) model introduced by Hasbrouck (Hasbrouck J (1991) Measuring the information content of stock trades. J Finance 46:179–207). We provide evidence against several symmetry assumptions, very familiar among microstructure models. We report asymmetric adjustments of ask and bid prices to trade-related shocks, and asymmetric impacts of buyer and seller-initiated trades. In general, buys are more informative than sells. The likelihood of symmetric quote responses increases with volatility. We show that our findings are robust across different model specifications, time frequencies, and trading periods. Moreover, we find similar asymmetries in markets with different microstructures.

The impact of process innovations on firm's productivity growth: the case of Spain

The main aim of this paper is to investigate about the effect that a measure of the process innovation performance of a firm has on its labour productivity growth. This analysis is mainly a consequence of two considerations. The first one results from a clear differentiation of the role that product and process innovations have on a firm's performance. The second one is to assume that the knowledge capital of a firm is mainly composed by its successful research. The study demonstrates that process innovation has a positive and significant effect on firm's productivity growth. Moreover, this result is robust under a wide range of alternative specifications and, in any case, the variable behaves much better than R&D intensity. Following previous research, the detected quadratic relationship between vertical product differentiation and process innovation performance leads to the existence of some firms for which there exist a trade–off between quality and productivity.     

Timing, diffusion, and substitution of successive generations of technological innovations: The IBM mainframe case

Based on the behavioral assumptions of diffusion theory, this article proposes an extension of the Bass diffusion model that simultaneously captures the substitution pattern for each successive generation of a durable technological innovation, and the diffusion pattern of the base technology. Normative guidelines based on the model suggest that a firm should either introduce a new generation as soon as it is available or delay its introduction to a much later date at the maturity stage of the preceding generation. The decision depends on a number of factors including the relative size of the market potentials, gross profit margins, the diffusion and substitution parameters, and the discount factor of the firm. This “now or at maturity” rule is thus an extension and generalization of the “now or never” rule of Wilson and Norton [25]. Empirical and normative implications of the proposed model are explored for four successive generations on IBM mainframe computers: first generation (vacuum tubes); second generation (transistors); 360 family (integrated circuits); and 370 family (silicon chips). The model describes the growth of these generations well. The application of normative guidelines suggests that IBM introduced the two successive generations of 360 and 370 families too late, i.e., their time to market should have been shorter. Limitations and further extensions of the model and the application are discussed.     

基于社会资本的企业间网络变迁

现有研究对于企业间网络由强关系向弱关系变迁的发展模式已经基本达成共识,而在网络变迁的内在机制上仍存在较大分歧。本文基于社会资本理论和资源依赖理论,分两个阶段深入研究了企业成长初期企业间网络变迁的内在机制。在单层egocentric强关系网络模式下,社会资本增加与资源积累的动态促进过程是网络变迁的内在机制;随着强关系网络层级的不断增加,社会资本仍然能够促进企业效用的提高和资源的积累,但其贡献程度不断降低。当合作关系网络扩张到规模边界时,企业应当摆脱路径依赖,加入灵活性较大的弱关系网络,以获得持续发展。     

A model of multiple-unit ownership as a diffusion process

This paper develops and tests a new model for multiple-unit adoptions of durable goods based on the diffusion modeling tradition. Multiple-unit adoptions are a major component of sales for many consumer durable product categories. For instance, sales of multiple-unit adoptions for televisions have been higher than both first adoptions and replacement purchases since 1977, while for automobiles, they have represented more than 20% of sales since 1966 in Australia. The structural drivers of multiple-unit adoptions are quite different from either first purchase or replacement purchase. Hence, identifying and modeling the multiple-unit component of sales is important for aggregate sales forecasts. Moreover, consumer requirements for additional units of a product are likely to be considerably different than for the other components of sales (first purchases and replacement purchases). As such, the ratio of the first, multiple, and replacement sales components will strongly influence the product mix requirements of the market.

While forecasting and influencing multiple-unit sales are an important managerial issue, very little attention has been given to multiple-unit ownership in the diffusion modeling literature. The only model available was developed for the purpose of modeling relatively short-term behavior of multiple-unit adoptions, rather than the longer-term pattern of sales. We propose a model of multiple-unit adoptions as a diffusion process.

We apply the model to both color television and automobiles. Analysis of the model's long-term fit and forecasts in these applications provide support for the structure of the new model.     

Innovation strategies,process and product innovations and growth: Firm-level evidence from Brazil

Using World Bank ICS 2000–2002 data from Brazilian manufacturing firms, this paper identifies innovation strategies of firms – in particular internal development (“technology make”) and external acquisition (“technology buy)” – and their effect on successful process and product innovations. It subsequently explores the importance of process and product innovations for firm growth. Successful process and product innovations occur mostly through “technology buy” (mostly through the purchase of machinery and equipment), either alone or in combination with a “technology make” strategy. The option of only relying on internal development is less successful. The results on firm growth indicate that innovative performance is an important driver for firm growth. It is particularly the combination of product and process innovations that significantly improves firm growth. Both innovation and growth performance are supported by access to finance. Skills of workforce and management matter, but not necessarily tertiary education levels. The impact of international linkages on innovative and growth performance is mixed.     

Inter-firm networks and innovation: a survey of literature

This survey covers the recent literature on inter-firm networks as far as they have implications for innovation and technological change. The studies are classified according to the direction of causality in network studies. In the literature, some studies focus on the effect of networks, while others on the origins and formation of networks. These are represented as a circular flow diagram of network research. Circular diagram includes three themes of analysis as: (1) origins of networks, (2) firm performance, (3) network structure, and shows the relationship between these themes as observed in network research. The aim of this survey is to guide researchers working on inter-firm networks about the theoretical and empirical results obtained up to now in the field and to highlight those areas which need further work.