Technology Adoption, Bubbles, Network Externalities and Growth

44 Pages Posted: 1 Nov 2013 Last revised: 25 Feb 2014

See all articles by David Zvilichovsky

David Zvilichovsky

Coller School of Management Tel Aviv University

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Date Written: October 30, 2013

Abstract

This paper studies the effect of innovation uncertainty on the concomitant time path of firm valuations, technology adoption and growth in a setting which incorporates positive network externalities. The resulting stock market bubble, induced by uncertainty and accelerated by the externality forces, may serve as a coordination mechanism which compensates for un-internalized externalities, thereby supporting higher post-bubble growth. Such a path may also overcome some of the potential chilling effects attributed to network formation. Under the proposed framework, uncertainty may improve long-term growth. Associating a productive role to certain bubbles may have far-reaching policy implications.

Keywords: Bubbles, Technology Adoption, Network Externalities, Growth, Innovation, Uncertainty

JEL Classification: O33, L1, O40, N1, E32, G12

Suggested Citation

Zvilichovsky, David, Technology Adoption, Bubbles, Network Externalities and Growth (October 30, 2013). Available at SSRN: https://ssrn.com/abstract=2347616 or http://dx.doi.org/10.2139/ssrn.2347616

David Zvilichovsky (Contact Author)

Coller School of Management Tel Aviv University ( email )

Tel Aviv University
Ramat Aviv, Tel Aviv, 69978
Israel

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