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RP 4111 Technology Diffusion 2023

The document outlines the three stages of technological change: invention, innovation, and diffusion, emphasizing the role of private firms in research and development. It discusses the induced innovation hypothesis, the evolutionary perspective of R&D, and factors influencing the diffusion of innovations, including market failures and characteristics of innovations. Additionally, it categorizes adopters of technology into five groups based on their willingness to adopt new technologies and describes the technology life cycle from emerging to base technology.

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8 views10 pages

RP 4111 Technology Diffusion 2023

The document outlines the three stages of technological change: invention, innovation, and diffusion, emphasizing the role of private firms in research and development. It discusses the induced innovation hypothesis, the evolutionary perspective of R&D, and factors influencing the diffusion of innovations, including market failures and characteristics of innovations. Additionally, it categorizes adopters of technology into five groups based on their willingness to adopt new technologies and describes the technology life cycle from emerging to base technology.

Uploaded by

reza.urp.ku
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Technology

Technology and and Technology


Technology
Diffusion…..
There are three stages of the process of technological change:
Diffusion…..
Invention constitutes the first development of a scientifically or
technically new product or process.

Most inventions never actually develop into an innovation,


which is accomplished only when the new product or process is
commercialized, that is, made available on the market.

The invention and innovation stages are carried out primarily in


private firms through a process that is broadly characterized as
“research and development” (R&D).

Finally, a successful innovation gradually comes to be widely


available for use in relevant applications through adoption by
firms or individuals, a process labeled diffusion.

The cumulative economic or environmental impact of new


technology results from all three of these stages, which are
referred to collectively as the process of technological change.
Technology
Technology and
and Technology
Technology Diffusion…..
Diffusion…..
Induced Innovation.
• Firms undertake an investment activity called “R&D” with the intention of
producing profitable new products and processes.
• Firms’ try to maximize their value, or, equivalently, to maximize the
expected discounted present value of cash flows.
• The output of R&D is modeled as “knowledge capital”- an intangible asset
that firms use together with other assets and other inputs to generate revenues.
• R&D is a profit-motivated investment activity and the rate and direction of
innovation are likely to respond to changes in relative prices.
• The “induced innovation” hypothesis suggests an important pathway for
the interaction of environmental policy and technology, and for the introduction of
impacts on technological change as a criterion for evaluation of different policy
instruments.
The Evolutionary Perspective.
The idea of bounded rational firms that engage in “satisficing” rather than
optimizing behavior is to build an alternative model of the R&D process. In this
“evolutionary” model, firms use “rules of thumb” and “routines” to determine how
much to invest in R&D, and how to search for new technologies.
The empirical predictions of this model depend on the nature of the rules of
thumb that firms actually use.
For regulation to have important informational effects, the government
must have better information than firms have about the nature of environmental
problems and their potential solutions.
Technology
Technology andand Technology
Technology
New Technology Diffusion…..
Diffusion…..
Diffusion Potential users
time (through information)

RANK MODEL (adoption depends on threshold


distribution and returns)
DIFFUSION

EPIDEMIC MODEL (speed of technology distribution


from adopters to non-adopters)

LIMITATION OF DIFFUSION:
 Market failures-
 Inadequate information-it connects with agency problems
 Uncertainty –because of newness, it means that users are not sure how it
will perform
 Principal-agent problems – external(ex. landlord/tenant) and internal
(individual/department) agency problems
 Financing access- adoption of new technology may be constrained by
inadequate access to financing and even import barriers may inhibit the
adoption of technology
Technology
Technology and
and Technology
Technology
Diffusion of
Diffusion…..
Innovation:
Diffusion…..
Diffusion of innovation refers to the process by which an
innovation is communicated through certain channels over time
to members of a social system (Rogers, 1995)

Innovation: idea, practice, or object perceived as new

Channels: means by which a message gets from one individual


to another

Time: (1) the period during which knowledge passes to the


individual through when the innovation is adopted or rejected; (2)
the relative earliness or lateness with which Time, cont’d an
innovation is adopted, and (3) an innovation’s rate of adoption in
a system.

Social system: a set of interrelated units that are engaged in


Technology
Technology and
and Technology
Technology
Diffusion of
Innovation:
Diffusion…..
Diffusion…..
Five characteristics of innovations influence the rate of adoption:

Relative Advantage: the degree to which the innovation is
perceived to be better than the technology it replaces.


Compatibility: A higher level of compatibility with the values
and needs of the potential adopter is considered to improve
the chances of adoption.


Complexity: Technology that is difficult to learn, use, or
implement will have a slower rate of adoption.


Trialability: Technology that can more easily be
experimental will have a better chance of being adopted.


Observability: The degree to which an innovation can be
“seen” by other users and adopters will affect the rate of
adoption.
Technology
Technology
Diffusion of and
and Technology
Technology
Innovation: Diffusion…..
Diffusion…..
Technologies proceed through a life cycle:

Emerging Technology: still developing in terms of capability


or capacity. Its potential marketplace has not yet accepted it as
a technology that will be useful, useable, cost effective, or a
viable substitute for a technology (or service it could replace).

Pacing technology: beginning to grow in acceptance.


Multiple competing organizations may be implementing or
evaluating the technology. The technology has been identified
as having benefits that exceed its cost, or is viewed as one that
has a competitive advantage.

Key Technology: a technology that provides a competitive


differential – use of this technology enables/drives the business
and/or is a major reason the organization is more successful
than its competitors.

Base Technology: the technology becomes a required


technology for an organization. If an organization is to remain
viable, it cannot avoid using the technology.
Technology
Technology and
and Technology
Technology
Diffusion Diffusion…..
of
Diffusion…..
Innovation:
Technology
Technology and
and Technology
Technology
Diffusion Diffusion…..
of
Diffusion…..
Innovation:
Technology
Technology
Diffusion of and
and Technology
Technology
Innovation: Diffusion…..
Diffusion…..
When does one adopt? The time at which one adopts can be
categorized:


Innovators: Organizations or people that are willing to take higher
risk, or have experience in evaluating projects based on emerging
technologies.


Early Adopters: There is some assurance of the potential returns
from adopting a technology, but its visibility is not yet widespread,
or only these adopters see its application.


Early Majority: Adopters who waited until there was more
assurance for the success of the technology. Others have already
proven that the technology can be successful and there is an
understanding that the technology will eventually become a key and
a base technology.


Late Majority: Organizations have realized that they will have to
adopt the technology to stay competitive.


Laggards: The technology is likely to have become a base
technology and the main benefit to adopting it is to stay in the
market. The risk in being a laggard is that the cost of
implementation may now be greater than the economic benefit.
Technology
Technology and
and Technology
Technology
Diffusion…..
Diffusion…..

The END

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