The Positive Sum Strategy Harnessing Technology for Economic Growth (1986) / Chapter Skim
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Technology Diffusion, Public Policy, and Industrial Competitiveness
Technology Diffusion, Public Policy, and Industrial Competitiveness
Pages 373-392
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From page 373... ...
Yet this is seldom done. By failing to address systematically the issues concerning diffusion in our national policy discussions, we hate surrendered the opportunity to see whether it is possible to formulate any consistent set of goals, or to coordinate the actions of the many public agencies that are engaged in de facto setting of policies affecting the development of our technological capabilities.
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From page 374... ...
The review should indicate also how we might begin systematically to assess Me impact of present and proposed economic policies on private sector decisions affecting the installation of new production methods and the acceptance of new goods and services by consumers. It will be seen that the relevant range of governmental actions is very broad, including the tax treatment of investment, the funding of R&D, the education of scientists and engineers, regulation and standards setting, as well as the monetary and fiscal measures shaping Me macroeconomic environment I shall contrast the tangled mass of economic policy interventions that are being pursued, seemingly without regard for their impact on the diffusion of technological innovations, with the much narrower "domestic technology transfer" programs that have been assigned a formal mission to promote the domestic dissemination of technological .
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From page 375... ...
Efforts to speed up the rate of innovation in industries supplying capital goods can create expectations of larger capital losses through obsolescence for firms that consider adopting the new technology when it first appears. Hence, the promise of faster innovation rates can delay actual adoption decisions.
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From page 376... ...
However feasible the designs for new products and production processes may be from an engineering standpoint, it is He prospects for their diffusion into use that ultimately impart economic value to this form of new knowledge. Be that as it may, the plain fact is that adoption of technological innovations has yet to acquire an aura of glamour in contemporary American society.
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From page 377... ...
But notice that the almost universal fixation on proposals intended to accelerate the pace of advance by influencing the allocation of private sector funds for research and development has had a curious side effect: it contributes to distracting the attention of policymakers from the ultimate goals of application, on which commercial R&D expenditures are predicated. Innovation has thus become our cherished child, doted upon by all concerned with maintaining competitiveness and renewing failing industries; whereas diffusion has fallen into the woeful role of Cinderella, a drudgelike creature who tends to be overlooked when the summons arrives to attend the Technology Policy Ball.
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From page 378... ...
A less innovative document might well have been expected to offer recommendations encouraging activities under every category in the classic tripartite scheme: (1) organized or in foal research leading to invention; (2)
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From page 379... ...
These have confinned the general role of profitability considerations in adoption decisions, while showing that differences in technical characteristics of production programs, product mixes, and institutional structures of firms are key factors governing the diffusion process. Davies (1979)
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From page 380... ...
The preceding catalog does not yet exhaust the list of significant aspects of heterogeneity within the population of "potential adopters"; not even the list of important objective economic differences capable of generating a wide distribution of responses to an innovation about which few technological uncertainties remain. Two further basic aspects of the demand side of microeconomic adoption decisions must be recognized here.
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From page 381... ...
Durable facilities surviving from earlier epochs may pose barriers to the introduction of bestpractice methods ~at, in pathological cases, cannot be surmounted by the workings of normal competitive market processes (see David, 1975:Ch. 5; and David, 19851.
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From page 382... ...
of 26 technology-transfer projects involving manufacturing ventures In chemicals, petroleum refining, and machinery found ~at, on average, 19 percent of total project costs was accounted for by these intangibles: pre-engineering information exchanges; engineering costs associated win ~ansfemng He necessary designs; R&D personnel unsized during He transfer phase; and pre-start-up Gaining, learning, and debugging. We should recognize at this point Hat differences among fins in the costs of absorbing technological information, even information disseminated on a uniform basis by a supplier or an independent agency, may give rise to
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From page 383... ...
The third item on my list assumes particular significance for technologies characterized by the presence of network externalizes, as Hey are called in He economists' jargon (see Hanson, 1984; David, 1985; Katz and Shapiro, 1985~. Illustrations spring to mind readily in the field of telecommunications, where decisions regarding terminal equipment are affected by He costs of access to other pardes over existing transmission networks.
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From page 384... ...
3. Network technologies exhibit some of the same dynamic features in their development as do "freestanding" product and process innovations As a network's coverage is extended by linking up additional '~subscribers," Me cost of providing basic services to each user will decline, and Me potential qualitative advantages of being "hooked up" with a widening circle of users tend to increase.
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From page 385... ...
This opens Me possibility Mat a particular product design, process technology, or system can become "locked in," and rival technologies can become '`locked out" through the working of competitive market processes. In other words, evenn~al de facto standardization is Me most likely outcome, indeed, under some conditions it is a virtual certainty as Arthur (1985)
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From page 386... ...
The issue is what kind of technology standards will we get, and what seemingly small "accidents" of industrial history, or temporary public policy twists during the early phases of the diffusion of rival technologies, will leave an unintended but nonetheless indelible mark on Be future? If you need a concrete, everyday illustration of the workings of the "lock in" process and the kind of technological outcomes to which we can be led by seemingly small accidents of history, take a look at the awkwardly arranged QWERTY keyboard of your typewriter and your personal computer (see David, 1985)
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From page 387... ...
My purpose here is not to lament the small budgetary scale of federally financed technology-~ansfer efforts, or to bemoan He Reagan administration's evident reluctance to imitate Western European governments, which several years ago began developing industrial policies with greater emphasis on measures aimed at '~promoting He diffusion of new technologies" in specified areas (see Stout, 1981; David and Stoneman, 19851. What ~ wish to stress instead, is that there is far more to public policies and actions affecting technology diffusion Han the information-dissemination programs modeled on the Agricultural Extension Service.
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From page 388... ...
Rawer, for the sake of avoiding the discomfort of addressing systematically the issues concerning diffusion in our national policy discussions,-we have surrendered the opportunity to see whether it is possible to formulate any consistent set of goals, or to examine what would be entailed in trying to coordinate He actions of the many different public agencies that are now participating in a de facto technology policy-setting process. We are not avoiding making mistakes by proceeding in this way.
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From page 389... ...
ACKNOWLEDGMENT The author is indebted to Douglas Puffers, Paul Rhode, and Joshua Rosenbloom for able research assistance on projects supported under a grant to the Technological Innovation Program of the Center for Economic Policy Research at Stanford University, upon which this chapter has drawn. REFERENCES Arrow, Kenneth J
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From page 390... ...
1983. On the adoption of technological innovations in industry: Superficial models and complex decision processes.
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From page 391... ...
Paper presented at Technological Innovation Program Workshop, Stanford University, Department of Economics, January. Rogers, Everett M
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