Economias De Escala

Department of Economics, UCB UC Berkeley

Title: Adoption of New Technology Author: Hall, Bronwyn H., Department of Economics, University of California, Berkeley Khan, Beethika, Department of Economics, University of California, Berkeley Publication Date: 05-03-2003 Publication Info: Department of Economics, UCB, UC Berkeley Permalink: http://escholarship.org/uc/item/3wg4p528 Keywords:technology adoption, diffusion, network goods, technological standards, real options Abstract: The contribution of new technology to economic growth can only be realized when and if the new technology is widely diffused and used. Diffusion itself results from a series of individual decisions to begin using the new technology, decisions which are often the result of a comparison of the uncertain benefitsof the new invention with the uncertain costs of adopting it. An understanding of the factors affecting this choice is essential both for economists studying the determinants of growth and for the creators and producers of such technologies. Section II of this article discusses the modeling of diffusion and Sections III to V explore the determinants of diffusion and the evidence for theirimportance.

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Working Paper No. E03-330 Adoption of New Technology
Bronwyn H. Hall Department of Economics, University of California, Berkeley Beethika Khan Department of Economics, University of California, Berkeley May 2003

Abstract Thecontribution of new technology to economic growth can only be realized when and if the new technology is widely diffused and used. Diffusion itself results from a series of individual decisions to begin using the new technology, decisions which are often the result of a comparison of the uncertain benefits of the new invention with the uncertain costs of adopting it. An understanding of thefactors affecting this choice is essential both for economists studying the determinants of growth and for the creators and producers of such technologies. Section II of this article discusses the modeling of diffusion and Sections III to V explore the determinants of diffusion and the evidence for their importance.

Keywords: technology adoption, diffusion, network goods, technological standards,real options JEL Classification: O3, L1 __________________________
This paper is available on-line at http://repositories.cdlib.org/iber/econ/ or contact IBER mc1922; University of California Berkeley; Berkeley CA 94720-1922: iber@haas.berkeley.edu. For a complete list of Economics Dept working papers visit http://iber.berkeley.edu/wps/econwp.html

New Economy Handbook: Hall and Khan

April2003

Adoption of New Technology
Bronwyn H. Hall and Beethika Khan

I. Introduction
Unlike the invention of a new technology, which often appears to occur as a single event or jump, the diffusion of that technology usually appears as a continuous and rather slow process. Yet it is diffusion rather than invention or innovation that ultimately determines the pace of economic growth and the rateof change of productivity. Until many users adopt a new technology, it may contribute little to our well-being. As Nathan Rosenberg said in 1972, “in the history of diffusion of many innovations, one cannot help being struck by two characteristics of the diffusion process: its apparent overall slowness on the one hand, and the wide variations in the rates of acceptance of different inventions, onthe other.” Thus understanding the workings of the diffusion process is essential to understanding how technological change actually comes about and why it may be slow at times. Diffusion can be seen as the cumulative or aggregate result of a series of individual calculations that weigh the incremental benefits of adopting a new technology against the costs of change, often in an environment...