The Diffusion of New Technologies: Evidence from the Electric Utility Industry

59 Pages Posted: 6 Jul 2004 Last revised: 26 Oct 2022

See all articles by Nancy L. Rose

Nancy L. Rose

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Paul L. Joskow

Alfred P. Sloan Foundation; Massachusetts Institute of Technology (MIT) - Department of Economics

Date Written: August 1988

Abstract

This paper investigates the effect of firm size and ownership structure on technology adoption decisions, using data on the electric utility industry. We argue that traditional models of technology diffusion are subject to sample selectivity biases that may overstate the effect of firm size on adoption probabilities. By extending conventional hazard rate models to use information on both adoption and non-adoption decisions, we differentiate between firms' opportunities for adoption and their underlying adoption propensities. The results suggest that large firms and investor-owned electric utilities are likely to adopt new technologies earlier than their smaller and publicly-owned counterparts. Moreover, the selection biases from conventional statistical models can lead one to overstate size effects by a factor of two and to understate ownership structure and factor cost effects by two to four times.

Suggested Citation

Rose, Nancy L. and Joskow, Paul L., The Diffusion of New Technologies: Evidence from the Electric Utility Industry (August 1988). NBER Working Paper No. w2676, Available at SSRN: https://ssrn.com/abstract=439596

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