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.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
4463.
Length: Date of creation: Apr 1994 Date of revision: Handle: RePEc:nbr:nberwo:4463
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Jovanovic, Boyan & MacDonald, Glenn M., 1988.
"Competitive Diffusion,"
Working Papers
88-29, C.V. Starr Center for Applied Economics, New York University.
[Downloadable!]
Jovanovic, B. & MacDonald, G.M., 1991.
"Competitive Diffusion,"
Papers
92-08, Rochester, Business - Financial Research and Policy Studies.
Find related papers by JEL classification: L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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