Working Paper: NBER ID: w4463
Authors: Boyan Jovanovic; Glenn MacDonald
Abstract: The usual explanation for why the producers of a given product use different technologies involves "vintage-capital": A firm understands the frontier technology, but can still prefer an older, less efficient technology in which it has made specific physical and human capital investments. This paper develops an alternative. "information-barrier" hypothesis: Firms differ in the technologies they use because it is costly for them to overcome the informational barriers that separate them. The paper endogenizes both innovative and imitative effort. The industry life-cycle implications -- declining price and increasing output -- broadly agree with the Gort-Klepper data. Empirically, the paper focuses on the slow spread of Diesel locomotives, which can not be explained by the vintage-capital hypothesis alone. For instance, contrary to that hypothesis, railroads were buying new steam locomotives long after the Diesel first came into use -- exactly as the information-barrier hypothesis would imply.
Keywords: technology diffusion; informational barriers; innovation; imitation; industry dynamics
JEL Codes: O31; L22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| informational barriers (L86) | technological adoption (O33) |
| costs of overcoming informational barriers (D83) | non-degenerate distribution of technological knowledge (D39) |
| innovation and imitation (O36) | technological capabilities (O33) |
| industry maturity (L68) | convergence of technological knowledge (O36) |
| imitative efforts of laggards (L15) | convergence of technological knowledge (O36) |
| technological spillovers (O33) | inefficiencies in the market (D61) |
| learning process (J24) | technology diffusion (O33) |