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Competitive Diffusion

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  • Jovanovic, B.
  • MacDonald, G.M.

Abstract

This paper studies the evolution of a competitive industry in which a fixed number of firms reduce costs by innovating and by imitating their rivals' technologies. As the firms' technologies gradually improve, industry output expands and price falls. Technological leaders tend to rely on innovations to reduce their costs, whereas the laggards rely more on imitation. Imitation causes technology to spread from the leaders to the followers and forces some convergence of technology among firms as the industry matures. This convergence is accompanied by faster growth of smaller firms and a consequent tightening of the distribution of output over firms. Copyright 1994 by University of Chicago Press.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jovanovic, B. & MacDonald, G.M., 1991. "Competitive Diffusion," Papers 92-08, Rochester, Business - Financial Research and Policy Studies.
    • Handle: RePEc:fth:robufr:92-08
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    References listed on IDEAS

    as
    1. Boyan Jovanovic & Rafael Rob, 1989. "The Growth and Diffusion of Knowledge," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(4), pages 569-582.
    2. Andolfatto, D. & MacDonald, G.M., 1995. "Endogeneous Technological Change, Growth, and Aggregate Functions," Working Papers 9504, University of Waterloo, Department of Economics.
    3. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
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    5. Rustichini, Aldo & Schmilz, James Jr., 1991. "Research and imitation in long-run growth," Journal of Monetary Economics, Elsevier, vol. 27(2), pages 271-292, April.
    6. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-918, December.
    7. Flaherty, M Therese, 1980. "Industry Structure and Cost-Reducing Investment," Econometrica, Econometric Society, vol. 48(5), pages 1187-1209, July.
    8. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-121, January.
    9. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-1165, December.
    10. Karl Shell, 2010. "A Model of Inventive Activity and Capital Accumulation," Levine's Working Paper Archive 1409, David K. Levine.
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    More about this item

    Keywords

    competition ; economic models ; prices;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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