AbstractThe 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.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4463.
Date of creation: Sep 1993
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Publication status: published as Journal of Political Economy, 102, no. 1, (February 1994), p. 24-52
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Other versions of this item:
- Jovanovic, Boyan & MacDonald, Glenn M, 1994. "Competitive Diffusion," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(1), pages 24-52, February.
- Jovanovic, B. & MacDonald, G.M., 1991. "Competitive Diffusion," Papers, Rochester, Business - Financial Research and Policy Studies 92-08, Rochester, Business - Financial Research and Policy Studies.
- Jovanovic, Boyan & MacDonald, Glenn M., 1988. "Competitive Diffusion," Working Papers, C.V. Starr Center for Applied Economics, New York University 88-29, C.V. Starr Center for Applied Economics, New York University.
- Jovanovic, B. & Macdonald, G.M., 1988. "Competitive Diffusion," RCER Working Papers, University of Rochester - Center for Economic Research (RCER) 160, University of Rochester - Center for Economic Research (RCER).
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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