Endogenous Acceleration of Technological Change

Abstract

Our study shows that the technological development of a firm can be subject to an endogenous acceleration mechanism. The more advanced a firm is in using a particular set of technologies, the more likely will it adopt additional, related technologies. This acceleration mechanism implies that marginal differences in early adoption decisions lead to substantial differences in technology endowment later. This hypothesis is tested in a dataset that records the adoption times of various e-business technologies in a sample of 7,302 firms from 10 different industry sectors and 25 European countries. Estimation is carried out with a semi-parametric hazard rate model that controls for unobserved heterogeneity. The results show that the probability to adopt strictly increases with the number of previously adopted e-business technologies. Evidence for a growing digital divide among the companies in the sample is demonstrated for the period from 1994-2002. The endogenous acceleration mechanism is a possible source of early mover advantages, if technological uncertainty and technological improvements over time are not very large and if the price of the new technologies remains roughly constant.Technology adoption, Technological competition, Complementarity, Hazard rate models, IT