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ABSTRACT This paper surveys some of the most noteworthy literature on the diffusion of process technologies from the point of view of economics. It examines the main theoretical approaches to the diffusion phenomenon: epidemic and learning effects, equilibrium models associated with firm characteristics and strategic interaction. It also discusses the role of the supply side. Empirical work modelling inter-firm diffusion is reviewed, and special attention is given to the role of geography and inter-firm networking in the process of knowledge transfer and diffusion. Some suggestions for further research are presented as a conclusion.
Key words: Diffusion of innovations; Geography; Inter-firm networking; Spillovers. gEL classifications: L10, 030.
1. Introduction
Technological diffusion is the process by which innovations, be they new products, new processes or new management methods, spread within and across economies (Stoneman, 1986). The effect of technological change on economic welfare depends ultimately upon the degree to which innovations are diffused.
Technology dissemination is a primary contributor to productivity growth (Baumol, 1991). A firm, industry or nation with an impressive inventive record may still lag behind its competitors if it fails to diffuse the innovations it introduces. Nabseth and Ray (1974) provide suggestive evidence that this is precisely the case for the UK, compared with its international competitors.
This paper surveys some of the main literature on the diffusion of process technologies. This is done from the point of view of economics. However, works in other areas are occasionally introduced, whenever they focus on relevant issues that theoretical or empirical work in economics does not seem to have covered adequately. The diffusion phenomenon has been approached from a series of different perspectives. Sociology (see Rogers, 1995), geography (see Brown, 1981 or Clarck, 1984), marketing and consumer behaviour (see Mahajan, Muller and Bass, 1990) are some of the areas that have dealt with the subject. There are many similarities between the diffusion of industrial processes and the diffusion of new consumer durables.
Diffusion involves the initial adoption of a new technology by a firm (inter-firm diffusion) and the subsequent diffusion of the innovation within the firm (intra-firm diffusion). The latter is the process by which the firm's old technologies and facilities are replaced by new ones. The economics literature on diffusion has addressed three main...