A Punctuated-Equilibrium Model of Technology Diffusion
We present an evolutionary model of technology diffusion in which an old and a new technology are available, both of which improve their performance incrementally over time. Technology adopters make repeated choices between the established and the new technology based on their perceived performance, which is subject to uncertainty. Both technologies exhibit positive externalities, or performance benefits from others using the same technology. We find that the superior technology will not necessarily be broadly adopted by the population. Externalities cause two stable usage equilibria to exist, one with the old technology being the standard and the other with the new technology the standard. Punctuations, or sudden shifts, in these equilibria determine the patterns of technology diffusion. The time for an equilibrium punctuation depends on the rate of incremental improvement of both technologies, and on the system's resistance to switching between equilibria. If the new technology has a higher rate of incremental improvement, it is adopted faster, and adoption may precede performance parity if the system's resistance to switching is low. Adoption of the new technology may trail performance parity if the system's resistance to switching is high.
Volume (Year): 45 (1999)
Issue (Month): 2 (February)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jennifer F. Reinganum, 1985.
"Innovation and Industry Evolution,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 100(1), pages 81-99.
- Reinganum, Jennifer R., "undated". "Innovation and Industry Evolution," Working Papers 426, California Institute of Technology, Division of the Humanities and Social Sciences.
- Utterback, James M. & Suarez, Fernando F., 1993. "Innovation, competition, and industry structure," Research Policy, Elsevier, vol. 22(1), pages 1-21, February.
- Pankaj Ghemawat, 1991. "Market Incumbency and Technological Inertia," Marketing Science, INFORMS, vol. 10(2), pages 161-171.
- Clark, Kim B., 1985. "The interaction of design hierarchies and market concepts in technological evolution," Research Policy, Elsevier, vol. 14(5), pages 235-251, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:45:y:1999:i:2:p:160-177. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If references are entirely missing, you can add them using this form.