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Multiplant Firms and Innovation Adoption and Diffusion

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  • Richard A. Jensen

    () (Department of Economics and Econometrics, University of Notre Dame)

Abstract

A new theoretical explanation is provided for the empirical observation that large firms usually adopt sooner, although there are notable exceptions. The analysis focuses on the adoption of an innovation of uncertain profitability by a large firm with two plants and a small firm with one. Marginal production costs are increasing in each plant, and economies of multiplant operation are possible. These have conflicting effects on the incentive to adopt. The large firm benefits more from adopting a success. However, if an adopter must shut down a plant to learn about the innovation, the loss of multiplant economies reduces the large firm’s incentive to adopt. Absent multiplant economies, the large firm is more likely to lead a diffusion because its greater return from a success dominates. However, the small firm is more likely to lead a diffusion if there are multiplant economies and the large firm’s learning cost disadvantage dominates.

Suggested Citation

  • Richard A. Jensen, 2004. "Multiplant Firms and Innovation Adoption and Diffusion," Southern Economic Journal, Southern Economic Association, vol. 70(3), pages 661-671, January.
  • Handle: RePEc:sej:ancoec:v:70:3:y:2004:p:661-671
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    Cited by:

    1. Sierdjan Koster, 2007. "The Entrepreneurial And Replication Function Of New Firm Formation," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 98(5), pages 667-674, December.
    2. Park, Timothy A., 2008. "Evaluating Labor Productivity in Food Retailing," Agricultural and Resource Economics Review, Cambridge University Press, vol. 37(02), pages 288-300, October.
    3. A. Mahathi & Rupayan Pal & Vinay Ramani, 2016. "Competition, strategic delegation and delay in technology adoption," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(2), pages 143-171, March.
    4. Timothy Park & Robert King, 2007. "Evaluating food retailing efficiency: the role of information technology," Journal of Productivity Analysis, Springer, vol. 27(2), pages 101-113, April.
    5. Arghya Ghosh & Munirul Nabin Haque, 2006. "Sequential technology adoption with asymmetric firms," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(2), pages 157-172.
    6. Miller, David A., 2008. "Invention under uncertainty and the threat of ex post entry," European Economic Review, Elsevier, vol. 52(3), pages 387-412, April.
    7. Chiara Verbano & Karen Venturini & Giorgio Petroni & Anna Nosella, 2008. "Characteristics of Italian art restoration firms and factors influencing their adoption of laser technology," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 32(1), pages 3-34, March.

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