The diffusion of new technology: adoption subsidies, spillovers, and transaction costs
3874 mots
16 pages
1. Introduction A new technology goes through two principal stages; the invention stage and the innovation stage. The invention stage is driven by firms' decisions to undertake research and development efforts, the economic literature is abound with studies that attempt to understand and explain firms' decisions to undertake R&D activities. R&D effort however, bears fruits only when research output is incorporated into the production process. A new technology is incorporated into the production process (innovation stage) only when tangible gains from its use are expected or have been demonstrated elsewhere. In some cases, it is possible that between the invention stage and the innovation stage additional efforts are needed to accelerate the diffusion of the new technology. For instance, in situations where inputs are particularly scarce, as is the case with water and energy for example, the regulator may be inclined to encourage the early adoption of a new input-saving technology using subsidies, where the regulator underwrites part of the cost that each firm incurs upon the adoption of the new technology. The diffusion of a new technology was studied by Reinganum (1981a,b), Fudenberg and Tirole (1985), and Quirmbach (1986) among others. Hoppe (2002) provides an extensive survey of the literature about the timing of adoption of a new technology, she distinguishes between: (i) certain vs. uncertain value and availability of a new technology, and (ii) between strategic vs. non-strategic adoption of a new technology. Reinganum (1981a,b) shows that although identical and fully informed, firms adopt a new technology sequentially. Fudenberg and Tirole (1985) study the adoption of new technology and outline the importance of the threat of preemption as a rent-equalizing factor in games of timing. They show that when preemption is possible then in the case of a symmetric duopoly, payoffs are equal in equilibrium and adoption is simultaneous, however in an oligopoly that