Technology diffusion.

Abstract

This chapter analyses the mechanisms of technology diffusion and discusses the need for making diffusion policy a major element of overall technology policy. The analysis is based on a distinction between disembodied technology diffusion and equipment-embodied technology diffusion. Disembodied technology diffusion is characterised by research spillovers and by the absorptive capacity of firms. The term "research spillover" refers to knowledge developed by one firm becoming potentially available to others. Absorptive capacity refers to the ability of firms to an intangible nature, R&D thus both develops new products and enhances the capacity of firms to learn to anticipate and follow future developments. Formal or informal networks of industries and firms, within which participants are at the same time suppliers and demanders and demanders of new technology, facilitate this process.

Equipment-embodied diffusion recalls the more traditional pattern, in which a few industries act as suppliers os new technology through their sales of technologically-intensive goods to downstream industires. Certain key technologies (mostly related to information technology - I T - ) play a central role. Interantional differences, market structure, the expectations of investors, characteristics of innovations in modern production systems, skills abailability and the organisation of firms all influence this process. Market structure in the supplying industries determines prices of technologically-intensive inputs and thus the degree to which benefits due to the original innovation are captured by the user industries or consumers. The real or perceived pressures of competition and the relative advantages of using competing technologies affect the pace of investment and adoption of new technologies.

The economic performance of the bulk of manufacturing and sevice industries that lie outside new technology sectors depends to a large extent on adopting ideas and products developed elsewhere. Since society benefits from the R&D efforts of firms, public policies should provide innovators with an environment which stimulates innovative activity while allowing maximun use of their products. A stable macro-economic environment that encourages investment in the creation and adoption of new technologies is an important prerequisite. More important, however, are micro-economic policies that incite firms to share information, develop absorptive capacity and increase rates of adoption of new techologies, either directly (through subsides, financial schemes, etc.) or indirectly (through alteration of the institutional and regulatory environment).