Cabral, Ricardo Joao; PhD
UNIVERSITY OF SOUTH CAROLINA, 1998
ECONOMICS, COMMERCE-BUSINESS (0505); ECONOMICS, GENERAL (0501); ECONOMICS,
THEORY (0511)
This dissertation accomplishes three main tasks. First, it surveys the literature
on innovation and
diffusion, and proposes a new and more complete theoretical framework for the
analysis of technological
diffusion of process innovations, based on recent diffusion theory. Second,
it derives a dynamic model
of adoption and strategic firm behavior from the neo-classical profit maximization
problem. This model
integrates four main theoretical streams of models of diffusion identified earlier.
The dynamic behavior
model developed here includes technological change, learning-by-doing, and lumpy
capacity, and
assumes closed-loop strategies and equilibria, leading to a dynamic model of
strategic interaction which
is richer and more appropriate than traditional models based on open-loop or
precommitment strategies
and equilibria. The results indicate that the optimal time of adoption depends
on the specification of the
fixed cost function, that firms in imperfectly competitive industries will build
capacity which may remain idle
for some period of time, and that in slowly growing markets, the incumbent will
produce at full capacity
while the learning curve is steep, and reduce the capacity utilization rate
as the learning curve flattens. In
rapidly growing markets, the incumbent may choose to build capacity which remains
idle initially, and may
set price below cost, so as to move down the learning curve faster. This is
true even for a monopoly
which does not face the threat of entry. Thus, predatory intent cannot be inferred
from below-cost
pricing. Finally, this study provides an empirical test for the integrated approach
to diffusion with data for
136 worldwide semiconductor manufacturing firms. The empirical results support
the existence of
vintage effects, specifically size and product-market effects, indicate the
existence of strong information
asymmetry effects due to differences in knowledge attributable to learning,
suggest the existence of
strategic behavior effects associated with the order of adoption, and provide
evidence supporting some
of the recent theoretical models of adoption. Despite the lack of evidence on
imperfect foresight effects,
this research supports an integrated approach to studies of adoption, and suggests
that future empirical
studies of adoption should seek to identify and model these four categories
of effects.
Social
Systems Simulation Group
P.O. Box 6904 San Diego, CA 92166-0904 Roland Werner, Principal Phone/FAX (619) 660-1603 |