The Diffusion of a Process Innovation with Gently Declining Production Cost |
| |
Authors: | Qiangbing Chen Yali Liu |
| |
Institution: | (1) Department of Economics and Finance, School of Business and Technology, East Tennessee State University, Johnson City, TN, USA;(2) Department of Mathematics, East Tennessee State University, P.O. Box 70663, Johnson City, TN 37614, USA |
| |
Abstract: | 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. |
| |
Keywords: | |
本文献已被 SpringerLink 等数据库收录! |
|