International diffusion of new technology

Abstract

This study explores the international diffusion of new technology i.e. changes over time in the extent to which world output is produced using, or world consumption is made up of products incorporating, specific new technologies. This topic has received relatively little attention in the literature. Many of the theoretical arguments developed in the literature for the study of domestic diffusion are here systematically applied to international diffusion for the first time. We propose that patterns of international diffusion derive from two related processes: inter-country diffusion or the extensive margin, and intra-country diffusion or the intensive margin. We start with a study of the relative importance of these two processes. Using data on four technologies we show that the relative importance of the intensive to the extensive margin increases over time. The same pattern was identified by Battisti and Stoneman (2003) in their study of the importance of inter- and intra-firm diffusion in domestic diffusion. The main body of the thesis is concerned with the question how (if at all) does international diffusion affect domestic diffusion? Two theoretical arguments are explored: the first uses an epidemic and the second a decision-theoretic model. The models are extensions of the seminal models of Bass (1969), Mansfield (1961) and Reinganum (1981b). Two specific hypotheses arise, namely that international diffusion affects domestic diffusion through: i) an exogenous learning effect or inter-country spillovers; and ii) a negative stock effect. The hypotheses have contradictory empirical implications. The epidemic model is tested using data on steam- and motor ship diffusion. We find evidence of spillovers however the direction of the effect is not robust across countries. We discuss the time-series properties of the data, which is rarely done in the literature, and find some problems which may partly explain the results. We then develop an international stock effect hypothesis using a decision-theoretic model based on the closed economy model of Reinganum (1981b). This allows for firm heterogeneity in production costs. We discuss how heterogeneity impacts on international diffusion patterns when some of that heterogeneity is on the country-level. Empirically we find evidence of an international stock effect in the diffusion of the basic oxygen furnace. A number of explanatory variables which capture cross-country differences in production and adoption costs are also significant