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The Diffusion of New Technologies: Evidence from the Electric Utility Industry

  • Nancy L. Rose
  • Paul L. Joskow

This article investigates the effect of firm size and ownership structure on technology adoption decisions using data on the electric utility industry. We argue that traditional models of technology diffusion may be subject to sample selectivity biases that overstate the effect of firm size on adoption probabilities. By extending conventional hazard rate models to use information on both adoption and nonadoption decisions, we differentiate between firms' opportunities for adoption and their underlying adoption propensities. The results suggest that large firms and investor-owned electric utilities are likely to adopt new technologies earlier than are their smaller and publicly owned counterparts. Moreover, the selection biases from conventional statistical models may overstate size effects and understate ownership and factor cost effects by as much as a factor of two.

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Paper provided by Massachusetts Institute of Technology (MIT), Department of Economics in its series Working papers with number 501.

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Date of creation: Jul 1988
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Handle: RePEc:mit:worpap:501
Contact details of provider: Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
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Web page: http://econ-www.mit.edu/

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  1. Nickell, Stephen J, 1979. "Estimating the Probability of Leaving Unemployment," Econometrica, Econometric Society, vol. 47(5), pages 1249-66, September.
  2. V. Kerry Smith, 1974. "The Implications of Regulation for Induced Technical Change," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 623-632, Autumn.
  3. Benvignati, Anita M, 1982. "Interfirm Adoption of Capital-Goods Innovations," The Review of Economics and Statistics, MIT Press, vol. 64(2), pages 330-35, May.
  4. Stoneman, P L, 1985. "Technological Diffusion : The Viewpoint of Economic Theory," The Warwick Economics Research Paper Series (TWERPS) 270, University of Warwick, Department of Economics.
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