[ANT95] no Antonelli - Diffusion of Information Technologies and Productivity Growth

8/3/2019 [ANT95] no Antonelli - Diffusion of Information Technologies and Productivity Growth

http://slidepdf.com/reader/full/ant95-no-antonelli-diffusion-of-information-technologies-and-productivity 1/17

J Evol Econ (1995) 5:1-1 7 - - J o u r n a l OI

E v o l u t i o n a r yE c o n om i c s

9 Springer-Verlag 1995

T he d iffusion of new inform at ion techno logies and

productivity growth*Cris t iano An tone l li

Labo ratorio di Econ om ia dell'Innov azione, Dipartimen to di Econ om ia, Universit~i di T orino,Via S.O ttavio 20, L1-10124 To rino, Italy

Abstract. Th is pa p e r inve s t iga te s the e f f ec t s o f the r a t e s o f d i f fus ion o f the c lus t e r

o f n e w i n f o r m a t i o n t ec h n o l o g i e s o n t h e g r o w t h o f o u t p u t a n d t o t a l f a ct o r

p r o d u c t i v i t y i n t h e m a i n O C E D a n d i n d u s t ri a li z i n g c o u n t r ie s i n t h e l a t e ei gh t ie s.T h i s d i ff u s io n a p p r o a c h c o n t r a s t s t h e t e c h n o l o g y p r o d u c t i o n f u n c t i o n fr a m e w o r k .

I t p r e d i c ts t h a t t h e r a t e s o f g e n e r a t i o n o f n e w t e c h n o l o g i e s a r e m u c h l es s e ff e ct iv e

t h a n t h e r a te s o f d i f f u s io n a n d t h e i n v e s t m e n t e f f o rt s i n d e t e r m i n i n g t h e g r o w t h o f

l a b o r p r o d u c t i v i t y e s p ec ia l ly w h e n c a p i t al - in t e n s iv e t e c h n o l o g ie s w h i c h c o m m a n d

h i g h l ev e ls o f i n v e s t m e n t s a r e c o n s i d e r e d . T h e r e s u lt s m a k e i t p o s s i b l e t o e l a b o r a t e

a n d a s se s s e m p i r i c a ll y t h e n o t i o n o f k e y - t e c h n o l o g i e s t h a t p r o v i d e p o s i t i v e ex t e r-

na l i t i e s to the r e s t o f the sys t e m .

Key words: D i f f u si o n - P r o d u c t i v i t y g r o w t h - I n f o r m a t i o n t e ch n o l o g i e s

JEL-classifications: 0 3 0 - L 9

1. Introduction

T h i s p a p e r i n v e s t ig a t e s t h e r e l a t i o n s h i p b e t w e e n t h e d i f f u s io n o f a k e y t e c h n o l o g y

s u c h a s n e w i n f o r m a t i o n t e c h n o lo g y a n d l a b o r p r o d u c t i v i ty g r o w t h .

A c c o r d i n g t o t h e re c e iv e d th e o r y t h e re s h o u l d b e a n " a u t o m a t i c l i n k " b e tw e e n

t h e g e n e r a t i o n o f te c h n o l o g i c a l c h a n g e , t h e o v e r a l l e n h a n c e m e n t o f e f fi c ie n c y i n t h e

p r o d u c t i o n f u n c t i o n a n d t h e e ff e ct iv e i n c r e as e o f to t a l f a c t o r p r o d u c t i v i t y . R e c e n ta d v a n c e s i n th e e c o n o m i c s o f i n n o v a t i o n a n d n e w t e c h n o l o g y , h o w e v e r , h a v e s h o w n

t h a t t h e f ul l i n t r o d u c t i o n o f t e c h n o l o g i c a l i n n o v a t i o n s i n t h e e c o n o m i c s y s t e m is al e n g t h y p ro c e s s w h i c h t a k e s a l o n g s t r e t c h o f t i m e t o b e c o m p l e t e d . M o r e s p e c if ic a ll y

* A preliminary version of this paper has bee n presented at the E uropean Conference of theInternational TelecommunicationsSociety held at the S tenungsbaden Yacht Club.



2 C. An tonelli

t h e s u c ce s sf ul i n t r o d u c t i o n o f a k e y t e c h n o l o g ic a l i n n o v a t i o n i n t o t h e e c o n o m i c

s y s t e m i s t h e o u t c o m e o f t h e c o m b i n e d p r o c e s s o f (1 ) i ts s e l e ct i o n o u t o f a v a r i e t y

o f c o m p e t i n g i n n o v a t i o n s ; (2) it s i m p l e m e n t a t i o n a n d i n c r e m e n t a l d e v e l o p m e n t

a c c o r d i n g t o t h e r e q u i r e m e n t s o f c u s t o m e r s a n d t h e o p p o r t u n i t i e s t o r e d u c e co s tso f f er e d t o s u p p l i e r s b y e c o n o m i e s o f sc a le , l e a r n i n g b y d o i n g a n d l e a r n i n g b y u s i n g;

(3 ) i ts i m i t a t i o n a n d f u r t h e r r e f i n e m e n t s b y o t h e r m a n u f a c t u r e r s w i t h f u r t h e r

d e c li n e s in m a r k e t p r i ce s ; (4 ) i ts a d o p t i o n b y a v a r i e t y o f p o t e n t i a l c u s t o m e r s w h i c h

a r e h e t e r o g e n e o u s b o t h i n t e r m s o f s iz e a n d a c c e ss t o b o t h f a c t o r a n d p r o d u c t

m a r k e t s .

T h e m i c r o e c o n o m i c s o f t h e d i f fu s i o n o f ne w c a p i t a l g o o d s i n c o r p o r a t i n g p r o ce s s

i n n o v a t i o n s h a s b e e n b a s e d o n t h e e p id e m i c a p p r o a c h e l a b o r a t e d b y G r i li c h es

(1 95 7) a n d M a n s f i e l d (1 96 1). T h e e p i d e m i c a p p r o a c h a s s u m e s a d i s e q u i l i b r i u m

p r o c es s w h e r e p r o f i ta b l e i n n o v a t i o n s a re a d o p t e d b y f i rm s w i t h a d e l a y e x p la i n e d

b y t h e c o s t s o f s u b s t i t u t i o n o f o l d m a c h i n e s ( d i ff e r en t i a te d a m o n g f i r m s b e c a u s e o fd i ff e re n c e s i n t h e i n t e r t e m p o r a l d i s t r i b u t i o n o f i n v e s t m e n t s ) a n d e s p e c ia l ly b y t h e

c o s t s o f a c q u i r i n g r e l e v a n t i n f o r m a t i o n n e c e s s a r y t o a s se s s t h e p r o f i t a b i l i t y o f n e wc a p i t a l g o o d s .

C o n s i s t e n t ly , a l a rg e e m p i r ic a l e v id e n c e h a s s h o w n t h a t t h e o u t c o m e o f s u c h a

c o m p l e x i n t e r d e p e n d e n t p r o c e s s , w e l l k n o w n a s t h e diffusion o f t e c h n o l o g i c a l

i n n o v a t i o n s , t a k e s p l a c e a l o n g a s i g m o i d t i m e p a t h w h i c h i m p l i e s s t r o n g d i s c o n -

t in u i ti e s a n d n o n l in e a ri ti e s i n t h e r a te s o f g r o w t h o f th e d e m a n d o f th e i n n o v a t e d

p r o d u c t . I n o t h e r w o r d s , t h e d o w n w a r d m o v e m e n t o f t h e i s o q u a n t i n th e t e c h n i q u e s

s p ac e w h i c h r e p r e se n t s t h e i n t r o d u c t i o n o f t e c h n o l o g i c a l i n n o v a t i o n i n t h e t e x t b o o k

m i c r o e c o n o m i c s , i s a p p r o p r i a t e o n l y a t t h e e n d o f d i f f u s io n p r o c e s s a s t h e r e s u l t o fa d i s c o n t i n u o u s a n d d y n a m i c p ro c e s s o f g e n e r a t io n , s e le c ti o n a n d a d o p t i o n .

C o n s e q u e n t l y , i t s e em s a p p r o p r i a t e t o p u t o u t t h e h y p o t h e s i s t h a t t h e p r o d u c t -

i v it y g r o w t h d e t e r m i n e d b y t h e i n t r o d u c t i o n o f i n n o v a t i o n s s h o u l d f o l lo w t h e

s i g m o i d t im e p a t h u s u a l l y a p p r o x i m a t e d b y a l o g i s t ic o r l o g l o g i s t ic f u n c t i o n . I n f a c t

i t c a n b e a r g u e d t h a t t h e r a te o f g r o w t h o f p r o d u c t i v i t y s h o u l d e x h i b it t h e s a m e

n o n - l in e a r it ie s a n d d i s c o n t in u i t ie s o f t h e r a t e s o f g r o w t h o f th e d e m a n d f o r

i n n o v a t e d p r o d u c t s . M o r e g e n e r al ly i t s e em s t h a t t h e r ec e n t a d v a n c e s m a d e i n

u n d e r s t a n d i n g t h e determinants o f th e d y n a m i c s u n d e r l y i n g t h e d i f fu s i o n o f

i n n o v a t i o n s , n o w m a k e i t p o s s ib l e t o e x a m i n e t h e consequences o f t h e d i f f u s io n o n

t h e e c o n o m i c s y s te m .T h i s a p p r o a c h s ee m s c o n s i st e n t w i t h th e P o s t - K e y n e s i a n fr a m e w o r k o f a n a ly s is .

I n t h a t t r a d i t i o n i n f a c t t h e r e l a t i o n s h i p b e t w e e n d i f fu s i o n a n d p r o d u c t i v i t y g r o w t h

r ec e iv e s fu l l a t t e n t i o n n o t w i t h o u t i t s o w n l im i t s , i.e . o v e r l o o k i n g t h e r o l e o f a d o p t i o n

c h o ic e s a n d e q u a t i n g d i ff u s io n t o t h e o u t c o m e o f th e p r o c e ss o f c a p i ta l a c c u m u l a t i o n

a n d i n v e s tm e n t . 1I n t h e P o s t - K e y n e s i a n a p p r o a c h a ll ne w inves tm ent , fo r given levels o f g e n e r a t i o n

o f t e ch n o l o g i c a l i n n o v a t i o n s , a n d g i v en l ev el s o f a d o p t i o n abili ty by entrepreneurs,is e x p e c te d t o h a v e s t r o n g p o s i t iv e e ff ec ts o n l a b o u r p r o d u c t i v i t y . D i f f u s i o n h e r e

As Kaldo r notes: "Hen ce the speed at wh ich a society can "absorb" capital (i.e. it can increaseits stock o f man -made equ ipmen t, relatively to labour) depends on its technical dynam ism, itsability to invent and introduce new techniques of production. A society wh ere technical changeand adap tation proceed slow ly, wh ere producers are reluctant to abando n traditional m ethodsand to adopt new techniques, is necessarily one w here the rate o f capital accum ulation is small.The co nverse of this proposition is also true: the rate at w hich a society can ab sorb and exploitnew techniques is limited by its ability to accum ulate capital" (Kaldo r 1957, p. 595).



New information technologies and productivity grow th 3

b e c o m e s t h e a u t o m a t i c o u t c o m e o f i n v e st m e n t: t h e r e l a ti o n s h ip b e t w e e n i n v e s t m e n t

a n d l a b o u r p r o d u c t i v i t y a p p e a r s i n t h e w e l l - k n o w n " t e c h n i c a l c h a n g e f u n c t i o n " o f

K a l d o r t o b e s h a p e d b y i m i t a t i o n l ag s. z

O u r a p p r o a c h s e em s t o p r e s e n t s o m e a d v a n t a g e s i n t h a t i t is l ik e l y t o s h e d s o m el ig h t o n t h e r e l a t io n s h i p b e t w e e n t h e e f fe c ti ve i n t r o d u c t i o n o f t e c h n o l o g i c a l c h a n g e ,

i n v e s t m e n t s a n d p r o d u c t i v i t y g ro w t h . P r o d u c t i v i t y g r o w t h in f a c t is d e t e r m i n e d , in

o u r a p p r o a c h , n o t o n l y b y t h e le v el o f t e c h n o l o g i c a l c h a n g e a n d i n v e s tm e n t , b u t

also b y t h e r a t e o f d i ff u s io n w h i c h h e l p u n d e r s t a n d i n g t h e n o n - l i n e a r p r o c e s s t h a t

" i n fu s e i n n o v a t i o n i n t o t h e e c o n o m i c s y s te m " .

I n t h i s p e r sp e c t iv e it se e m s t h a t s o m e " i n f u s i o n " o f n ew m i c r o e c o n o m i c s b a s e d

o n t h e a s s u m p t i o n s o f b o u n d e d r a t i o n a l i ty a n d i m p e r f e c t k n o w l e d g e i s e s se n t ia l t o

g r a s p t h e es s en c e o f g r o w t h p r o c e s s e s a s d e p ic t e d b y t h e N e o - K e y n e s i a n a p p r o a c h

a n d t o b e t t e r u n d e r s t a n d t h e d e l a y s i n th e r e l a t i o n s h i p b e t w e e n t h e r a t e o f g e n e r a -

t i o n o f te c h n o l o g i c a l c h a n g e , th e r a t e o f i n v e s tm e n t s , a n d t h e r a t e o f g r o w t h o fp r o d u c t i v i t y . W h e n n e w " m a c h i n e s " a r e g e n e r a t e d s u c h t h a t t h e i r u s e im p l i es s o m e

d i s c o n t i n u i t y w i t h p r e e x i s t in g t e c h n o l o g i e s a n d , c o n s e q u e n t l y , t h e n e e d f o r s o m e

l e a r n in g p r o c e s se s , d i ff u s io n l ag s d u e t o b o u n d e d r a t i o n a l i ty a n d d e l a y e d a d o p t i o n

c h o i c e s d o m a t t e r a s w e ll a s t h e a b i l i t y t o g e n e r a t e h i g h l ev e ls o f c a p i t a l

a c c u m u l a t i o n ( A b r a m o v i t z 1 9 8 9 ) .

2 . D i f f u s i o n i n v e s t m e n t a n d p r od u c t iv i ty g r o w t h

2.1. The new models of economic 9rowthT h e n e w m o d e l s o f e c o n o m i c g r o w t h r e c o g n i z e th e c e n t r a l ro l e o f t e c h n o l o g i c a l

c h a n g e a s d r iv e n b y r e s ea r c h a n d d e v e l o p m e n t a c t iv i ti e s i n t h e p r o c e s s o f e c o n o m i c

g r o w t h ( R o m e r 1 98 6; R o m e r 1 99 0). T h e n e w m o d e l s o f e c o n o m i c g r o w t h , h o w e v e r ,

f o c u s a ll a t t e n t i o n o n t h e g e n e r a t i o n o f n e w t e c h n o l o g i e s r a t h e r t h a n o n t h e i r a c t u a l

i n t r o d u c t i o n a n d d i ff u s io n in t h e p r o d u c t i o n p r o c es s . F r o m t hi s p o i n t o f v i ew a

s t ro n g c o m m o n a l i t y c a n b e f o u n d b e t w e e n th e m o d e l s o f e c o n o m i c g r o w t h a n d t h e

t e c h n o l o g y p r o d u c t i o n f u n c t i o n e l a b o r a t e d b y G r i l i c h e s ( 1 9 7 9 ) . T h e t e c h n o l o g y

p r o d u c t i o n f u n c t i o n r e l a te s e x p l i c i tl y t h e g e n e r a l l e v el s o f e f f ic i e n c y o f t h e p r o d u c -

t i o n f u n c t i o n t o t h e l ev e ls o f R & D e x p e n d i t u r e s o r t o t h e l e ve ls o f p a t e n t s g e n e r a t e d

(Gr i l i ches 1990) .

T h i s c o n t r a s t s s h a r p l y S c o t t ' s m o d e l w h i c h i n s t e a d s t re s s e s t h e l im i t s o f t h e

n o t i o n o f c a p i t a l a n d n e t i n v e s t m e n t a n d f o c u s a t t e n t i o n o n t h e r o le o f g r o s s

i n v e s t m e n t . O n t h e s e b a s e s S c o t t (1 9 8 9 ) s p e ci fi e s a s i m p l e g r o w t h e q u a t i o n i n w h i c h

t h e g r o w t h o f o u t p u t i s d e t e r m i n e d b y t h e ra t i o o f t o t a l i n v e s t m e n t s t o o u t p u t a n d

t h e r a t e o f g r o w t h o f e m p l o y m e n t . 3 S c o t t s t re s s es t h e r o l e o f t o t a l i n v e s t m e n t s , i .e .

2 See Kald or (1957): "O ur T T ' curve thus reflects no t only "inventiveness" in the strict sense, butthe degree of technical dynamism of the economy in a broader s en se w hic h ncludes not onlythe capacity to think o f new ideas, bu t the readiness of those in charge of production to a do pt newmetho ds o f production" (p. 596). M oreover K aldo r sha pe s the technical change function as atrunctated logistic characterized by an upw ard con vexity that will becom e flat beyond a givenpoint, because of some saturation effects. Ka ldor does n ot provide any further explanation forsuch a shape which in a mo re traditionally diffusion-orientedcontext would be ofcourse elaboratedtaking into account the recent advances in the m icroeconom ics of diffusion.3 The equ ation specified by Scott reads as follows:

go = al l + a2gL (I), w her e go is the grow th o f output, I is the ratio of total investm ents tooutput; gL is the rate o f growth of employment.



4 C. Antonelli

b o t h g r o s s a n d n e t i n v e s t m e n t , i n e x p l a i n i n g g r o w t h , a r g u i n g t h a t i t i s n o t p o s s i b l e

t o d i st in g u is h b e t w e e n m o v e m e n t s a l o n g th e p r o d u c t i o n f u n ct io n s a n d m o v e m e n t s

o f t h e p r o d u c t i o n f u n c t i o n s. M o r e s p e c if ic a l ly , S c o t t r e c a l l s t h a t g r o s s i n v e s t m e n t

p l a y s th e e s s e nt i a l r o le t o m o d e r n i z e t h e c a p i t a l e q u i p m e n t o f t h e e c o n o m y . G r o s si n v e s tm e n t s i n f ac t e m b o d y t e c h n o lo g i c a l c h an g e s. T h e s t a n d a r d a p p r o a c h t h a t

t a k e s i n t o a c c o u n t o n l y n e t in v e s t m e n t s i n s t e a d i s u n a b l e t o a p p r e c i a t e t h e p o s i t iv e

e ff ec ts o n p r o d u c t i v i t y g r o w t h o f t h e s u b s t i t u t i o n o f o b s o l e t e c a p i t a l g o o d s w i t h

b e t t e r m o d e r n i z e d p i ec e s o f e q u i p m e n t . I n s o d o i n g S c o t t 's a p p r o a c h s e e m s to r e t a i n

t h e e s se n c e o f t h e K a l d o r i a n t e c h n i ca l p r o g r e s s f u n c t i o n a n d t o b r i n g i t e v e n f a r th e r

w h e n a s s u m i n g t h a t t h e a c t u a l r a t e o f i n t r o d u c t i o n o f t e c h n o l o g i c a l c h a n g e i s a

f u n c t i o n o f i n v e s t m e n t s .

F r o m t h is p o i n t o f v i ew it s e e m s to u s t h a t t h e n e w m o d e l s o f e c o n o m i c g r o w t h

s h o u l d a c k n o w l e d g e t h e K a l d o r i a n l e g a c y m o r e e x pl ic it ly . A c c o r d i n g t o K a l d o r

(1 95 7), t h e r e i s a f u n c t i o n a l r e l a t i o n s h i p b e t w e e n t h e g r o w t h i n t h e c a p i t a l s t o c k a n dt h e g r o w t h o f l a b o u r p r o d u c t i v i t y . T h e " t e c h n i c a l p r o g r e s s f u n c t i o n " w a s c o n c e i v e d

t o b y p a s s t h e d is t i n c ti o n b e t w e e n t h e m o v e m e n t s a l o n g a p r o d u c t i o n f u n c t io n

a n d t h e s h i f ts o f t h e p r o d u c t i o n f u n c t i o n . 4 K a l d o r ( 19 5 7) f o r m a l i s e s t h e t e c h n i c a l

p r o g r e s s f u n c ti o n a s a n e q u a t i o n w h e r e t h e r a t e o f g r o w t h o f l a b o u r p r o d u c t i v i t y

is a n i n c r e a si n g f u n c t i o n o f t h e r a t e o f n e t i n v e s t m e n t e x p r e s s e d a s a p r o p o r t i o n o f

t h e s t o c k o f c a p i t a l s

A l a te r v e r s i o n o f K a l d o r ' s t e c h n i c a l p r o g r e s s f u n c t i o n ( K a l d o r - M i r r l e e s 1962 )

a s s e r ts t h a t t h e g r o w t h o f p r o d u c t i v i t y i s r e l a te d t o t h e g r o w t h r a t e o f g r o s s

i n v e s t m e n t p e r w o r k e r . T h i s s e c o n d s p e c if i c at i on o f t h e t e c h n i c a l p r o g r e s s f u n c t io n

is t he o u t c o m e o f t h e a t t e m p t m a d e b y K a l d o r t o a p p r e c i a t e t h e ef fe c ts o f t o t a li n v e s t m e n t s o n p r o d u c t i v i t y g r o w t h . T h e b a s i c a r g u m e n t w h i c h l i e s a t t h e c o r e o f

t h e t e c h n ic a l c h a n g e f u n c t i o n i s t h e p r o c e s s o f e m b o d i m e n t o f i n n o v a t i o n s a n d ,

c o n s e q u e n t l y , t h e i s s u e s o f d i f fu s i o n a n d s u b s t i t u t i o n o f n e w g e n e r a t i o n s o f c a p i t a l

g o o d s t o o l d o n e s . W i t h o u t i n v e s t m e n t e ff or ts , a v a i l a b l e i n n o v a t i o n s , e m b o d i e d i n

n e w c a p i t a l g o o d s , c a n n o t e n t e r t h e p r o d u c t i o n p r o c es s . 6

C o r n w a l l ( 19 76 ) m a k e s a m u c h s t r o n g e r a t t e m p t t o c a p t u r e t h e r o le o f t h e

d i ff u si o n o f t e c h n o l o g i c a l i n n o v a t i o n w i t h i n t h e k a l d o r i a n l e g a c y e l a b o r a t i n g a

m o d e l w h i c h s t re s s es t h e c e n t r a l r o l e o f th e i n t e r n a t i o n a l d i ff u si o n o f i n n o v a t i o n s

4 Th e equation specified by K ald or (1957) reads as follows:gp = a l I(t)/K(t) (2), where gp is the growth of productivity, I are the investments and K the

stock of capital.

5 Kaldor however recognizes: "W hether the increase in output would be m ore o r less proportionateto the increase in capital w ill depend (...) o n the speed with which capital is accum ulated, relativelyto the capacity to innovate and to infu se innovation into the economic system. The m ore"'dynamic" are the people in control of production, the keener they are in search of improvem ents,and the readier they are to ad opt new ideas and to introducing new ways of doing things, the fasterproduction (per man) will raise, and the higher is the rate o f accumulation of capital tha t can be

ma intained" (Kaldor 1961, p. 36).6 The original K aldo rian formulation of the technical progress function has been criticised froma neoclassical point o f view as nothing m ore tha n a mispecification of the production function and,subsequently, revised by Eltis (1971) who proposed to substitute the ratio of gross investments tothe stock of capital with the ratio o f gross investment to income. Eltis's specification of the technicalchange function is:

gp = aI~G I/Y) (3), where gp is the growth of labou r productivity, G I is the gross investment,Y is income.



New information technologies and productivity growth

a n d i n v e s t m e n t i n d e t e r m i n i n g t h e r a t e s o f g r o w t h o f o u t p u t . 7 T h e m o d e l o f C o r w a l l

p av es t h e w ay t o a l o n g s e r ie s o f em p i r i ca l e s ti ma t e s t h a t t r y t o ap p rec i a t e t h e

o p p o r t u n i t i e s f o r l a t e - c o m e r s t o " c a t c h - u p " w i t h a d v a n c e d c o u n t r i e s b y t a k i n g

a d v a n t a g e o f t h e f lo w o f t e c h n o l o g ic a l k n o w l e d g e t h a t s p i ll s f r o m a d v a n c e dco u n t r i e s (A b ramo v i t z 1 9 8 9 ) .W i t h r e s p ec t t o t h e l i t e r a t u re s o f a r r ev i ew ed t h r ee ma i n c r i t i c i s ms s h o u l d b e

ra i sed .F i r st , th e n e o c l a ss i ca l t r a d i t i o n a s r e n e w e d b y t h e n e w m o d e l s o f e c o n o m i c

g ro w t h i s n o t ab l e t o ap p rec i a t e t h e ro l e o f d i f fu s io n o f i n n o v a t i o n s a s d i s t i n c t fro m

t h e g en e ra t i o n o f n ew t ech n o l o g i e s . I n t h e n eo c l a s s ica l t r ad i t i o n , i n f ac t a ll ag en t s

a r e n eces s a r i l y i n eq u i l i b r i u m a t a n y t i me an d i t is d i f fi cu l t t o accep t t h e n o t i o n o f

d e l a y s d u e t o b o u n d e d r a t i o n a l i t y a n d i m p e r f e ct k n o w l e d g e . A m a j o r l i m i t t o t h e

n e w m o d e l s o f e c o n o m i c g r o w t h c o n s is t s in t h e l a c k o f a p r o p e r a s s e s sm e n t o f th e

m i c r o e c o n o m i c s b e h a v i o r o f p o t e n t i a l a d o p t e r s .S e c o n d , i n t h e P o s t - K e y n e s i a n t r a d i t i o n o f e c o n o m i c a n a l y s is t h e r e l a ti o n s h i p

b e t w ee n d i f fu s io n an d i n v es t m en t r ece i ves fu l l a t t en t i o n y e t n o t w i t h o u t i ts o w n

l imi t s , i .e . i t o v e r l o o k s t h e ro l e o f ad o p t i o n ch o i ces an d eq u a t e s d i f fu si o n to

t h e o u t c o m e o f t h e pr o c e s s o f c a p i ta l a c c u m u l a t i o n a n d i n v e s tm e n t . I n t h e P o s t -

K e y n e s i a n a p p r o a c h , i n f a c t a l l n e w i n v e s t m e n t , for g iven levels o f generation o ftechnological innovations, and give n levels of adoption abili ty by entrepreneurs, is

ex p ec t ed t o h av e s t ro n g p o s i t iv e e f fec ts o n l ab o u r p ro d u c t i v i t y . T h e f ea t u re s o f th e

d i f fu s i o n p ro ces s, a s d i s t in c t , o r n o t fu l ly i d en t i ca l t o t h e f l o w o f i n v es t m en t s a r e

s o m e w h a t m i s u n d e r s t o o d . N o t a l l i n v e s t m e n t n e c e s s a r i l y b r i n g s i n t h e s y s t e m -

i n n o v a t e d c a p i ta l g o o d s .t n t h e c a t c h i n g - u p m o d e l s t h e s p il lo v e r is a s s u m e d t o b e a n a u t o m a t i c o u t c o m e

o f t h e d i ff e re n c e i n l a b o r p r o d u c t i v i t y l ev e ls . N o a s s u m p t i o n s a r e m a d e a b o u t t h e

d i f f e ren t i a l c ap a b i l i t y o f l a t e - co m ers o f ac t u a l l y ad o p t i n g t h e s u p e r i o r t e ch n o l o g i e s

g e n e r a t e d b y a d v a n c e d c o u n t r ie s .T h e a b i l it y o f e n t r e p r e n e u r s t o c h o o s e t h e i n n o v a t e d c a p i t a l g o o d s is in f a c t

d e t e rm i n ed b y a v a r i e t y o f f ac t o r s s u ch a s (i) t h e l ev el s o f t h e s t o ck o f n ew ca p i t a l

g o o d s a l r e a d y a d o p t e d , ( ii ) t h e c o g n i t iv e e x te r n a li ti e s t h a t t a k e i n t o a c c o u n t t h e

d y n a m i c s o f viscosity i n t o t h e p r e l im i n a r y p h a s e s o f t h e a d j u s t m e n t o f a d o p t i o n

ch o i ces, an d t h e la t e r cu m u l a t i v e effects b ro u g h t i n b y (iii) t h e l i mi t ed k n o w l ed g e o f

e c o n o m i c a g e n t s a n d c o n s e q u e n t l e ve ls a n d r a te s o f c h a n g e o f t r a n s a c t i o n c o st s. Am o re ex p l ic i t an d d i r ec t co n s i d e ra t i o n o f ac t u a l d i f fu s io n l ev e ls an d r a t e s i s t h u s

n eces s a ry .T h i r d , a n d m o s t i m p o r t a n t , t h e m o d e l s s o f a r sp e ci fi ed i m p i n g e u p o n t h e c ru c i a l

ro l e o f t h e d i f fu s i o n o f a g en e r i c n o t i o n o f t e ch n o l o g i ca l ch an g e i n ex p l a i n i n g t h e

g r o w t h o f l a b o u r p r o d u c t i v it y . N o a s s u m p t i o n s a r e m a d e a b o u t t h e t e c h n ic a l

f e a t u re s o f t h e t e c h n o l o g y b e i n g d i ff u se d a n d t h e t e c h n o l o g ic a l c h a n g e a c t u a l l y in

p l ace . I t i s t h u s t i me t o t u r n t o m o re s p eci fi c an a l y s i s o f t h e ch a r ac t e r o f n ew

t ech n o l o g i e s b e i n g d i ffu s ed .

7 The m odel of Cornwall is synthesized n the followingequation:go = a ll + a21/Y + a3EX + a4dP (4), where go is the g row th of output, I is the share of

manu facturing investment on va lue added in m anufacturing and expresses the em bodimentprocess; I/Y is the recipro cal of the per capita incom e and expresses the opp ortunities for catching-up based u pon the borrowing of technological innovations; EX is the rate o f growth of exportsof manu factured growth, and d P is the growth of employment.



6 C. AntoneUi

3 . U n d e r s t a n d i n g n e w i n f o r m a t i o n t e c h n o l o g i e s

N ew in f or m a t ion t echno log ie s can b e cons ide r ed the cor e o f t he t e chno log ica l

chang e p resent ly in p lace.

M uch em pi r i ca l and theor e t i ca l wor k has b een don e in the seven t ie s and e igh ti e s

to b e t t e r un de r s t an d the eco nom ic a spec t s o f t he t e chn ica l spec if itie s o f t he new

techno logy . It is now a com m on sense to a s se r t tha t t he b l ack bo x o f t e chno logyhas to be opened up . Ma jor f i nd ings which appea r r e l evan t i n our con tex t c an be

sum m ar ized a s fo l lows :

- - T e c h n o l o g ic a l c h a n g e is n o t h o m o g e n e o u s a n d e v e n ly d is t ri b u t e d a c r o s s se c to r s,

p r oduc t s and t echno log ie s , bu t r a the r h igh ly concen t r a t ed and loca l i zed .

- - A t axo no m y o f t e chno log ica l i nnov a t ions is necessa r y to d i s ti ngu i sh be tw een

r ad ica l , m a jor and inc r em enta l i nnova t ions accor d ing to the i r e f f ec t s on the

p r o d u c t i o n p r o ce s s.- - T e c h n o l o g i c a l c h a n g e c a n n o t b e a n a l y s ed i n v a c u u m , b u t m u s t b e re l at e d t o

bo th ex i s t i ng t echno log ie s and to com plem enta r y t echno log ica l i nnova t ions .

Le t us ana lyse m o r e ca r e f u lly the se b r o ad i s sues w i th r e spec t to new in f o r m a t iona n d c o m m u n i c a t i o n t e c h n o lo g i es .

Technological opportunit ies: A large empir ica l evidence conf i rms tha t the case

and scope o f po ten t i a l i nno va t ions va r ie s consp icu ous ly ac r oss t e chno log ie s ;

consequ en t ly , t he cos t o f gene r a t ing and im plem ent ing a new t echn o logy i s ve r y

di f fe rent (Scherer , 1986 ) . Th e sco pe for in t rod uc in g increm enta l techno logica lchanges a l so di f fe r s across technologies . So fa r , Romer ' s ( I986) assumpt ions of

ho m og en eo us (diminishing) re turns in research ac t iv i t ies seem too generic. His to r i -

ca l ly one see s t ha t t e chno log ica l oppor tun i t i e s m ove ac r oss sec to r s so tha t

inves tm ent e f f o r t s concen t r a t ed in we l l - de f ined t echno log ie s a r e l i ke ly to exh ib i t

s t r ong inc r eas ing r e tu rns . T h i s seem s to b e to - da y the ca se o f i n f o r m a t ion

techno log ie s. I n i n f o r m a t ion t echno log ie s technological oppo rtunit ies are still larg elyo p e n ( M o n k 1 98 9).

Techn ological convergencies: Rad ica l technologica l innovat ion s a re like ly to ac t iva te

pr ocesse s o f te chno log ica l conv e r genc ie s ac r oss sec to r s and t echno log ie s . Techno l -og ica l sp iUove rs and t echno log ica l opp or tun i t i e s a r e ve r y h igh f o r pe r vas ive o r

"gene r i c " t e chno log ie s which a r e l i ke ly to ac t iva t e m a jor t e chno log ica l conve r -genc ies (Free m an 1982). On ce more , a l l emp ir ica l evidence ava i lable conf i rms tha tin f o r m a t ion t echno log ie s a r e h igh ly pe r vas ive and tha t m a jor t e chno log ica l

conve r genc ie s a r e und e r wa y because o f t he gene r a l ized app l i ca t ion o f m ic r oe lec -t r on ic s and in f o r m a t i c s t o a b r oa d a r r ay o f sec to r s and t echno log ies . I n i n f o r m a t iontechno log ie s technological convergencies f rom re la ted technologies and sc ient i f ic

fie lds a r e enor m ous . Ad vanc ed t e l ecom m u nica t ions can be co ns ide r ed i t se l f t her e su lt o f t e chno log ica l conv e r gences be tween advan ces in e l ec tr on ic s, i n f o rm a t i c s ,

space t echno logy , new m a ter i al s . I nves tm ent s i n advanc ed t e l ecom m u nica t ions a r ethus l i ke ly to ob ta in ve r y h igh r e tu r ns and to gene r a t e f u r the r oppor tun i t i e s f o r

highly pro f i table inves tmen ts in re la ted f ie lds (Antone l l i 1993).

Technological complementarit ies: C o m p l e m e n t a r i t y r e q u i r e m e n t s b e t w e e n t e c h -no log ica l i nnova t ions m a y b e key f ac to r s o f ove r a l l leve ls o f p r od uc t iv i ty andpr of i tab i l it y o f each t echno log ica l i nnova t ion . On ly wh en an ap pr op r i a t e m ix o f



New information technologies and productivity growth 7

co m ple m enta ry inno va t io ns i s ava i lable , fu ll e ffec ts in te rms o f increas ing re tu rnsand ex t e rna l i t i e s c an be ach i eved . In t e r re l a t edness be tw een new t echno log ie s and

the on es em bod ied in ex i s ti ng cap i ta l s t ocks i s a m a jo r i ssue in a s se s s ing the ra t e

o f e ffec tive pen e t ra t i on o f new t echno log ie s i n to t he econ om ic sys tem. (D av id 1985and F ran ke l 1955). W i th l ow l eve ls o f in t e r re l a tedness , a do p t io n o f new t echno log ie s

is f a s t er and t e chno logy b l end ing is e as ie r , fo r p i ece -mea l add i t i on o f new cap i t a lgoo ds t o ex i s t ing cap i t a l s t ocks i s poss ib le . In fo rm a t ion t e chno log ie s have g ene ra l ly

ve ry h igh requ i rem en t s i n t e rms o f i n t e r re l a tedness and a re, consequen t ly , l ike ly t od if fuse i n to e cono m ic sys tems on ly w hen a full s et o f com plem enta ry and

inte rre la ted infras t ruc tu re has been ins ta l led . Th e leve ls of techno logica l in te rre la t -

e d n e s s f o r a d v a n c e d t e le c o m m u n i c a t io n s a r e v e r y hig h. A d v a n c e d t e le c o m m u n i c a -t i ons canno t be add ed o n a p iece -mea l m ade to p reex i s t ing e l ec t romechan ica l

sw i t ch ing and cop pe r coax ia l c ab l e s. The a do p t ion o f e l e c tron i c sw i t ch ing an d

t ransmiss ion t e chno log ie s and op t i c a l fi be r c ab l e s requ i re s t he sc rapp ing o f l a rgechun ks o f t he i ns t al led i n f ra st ruc tu re . Th i s i s a lso t he ca se o f i n fo rm a t ion

t echno log ie s t ha t a re ba sed upon d ig i t a l t e l e communica t ions ne tw orks . The

m ode rn i za t ions o f sw i t ch ing and t ransmiss ion equ ipm ent i s a p reco nd i t i on to t he

g r o w t h o f d i s tr i b u t e d i n f o r m a ti c s b o t h i n t e r m s o f h a r d w a r e a n d s o f tw a r e . A d v a n c e dte l ecommunica t ions a re l i ke ly t o become the ba s i c i n f ra s t ruc tu re fo r a fu l l y

m o d e r n i ze d e c o n o m i c s ys te m . T h e a v a il a b il it y o f a n a d v a n c e d t e le c o m m u n i c a t io n s

infras t ruc ture i s essent ia l to provide universa l , re l iable , h igh-qua l i ty and low-cos tadv anced t e l ecomm unica t ions se rv i ce s up on w hich a fu ll a r ray o f t e chno log ica l and

organ iza t iona l i nnov a t ions such a s f lexib le m anufac tu r ing sys tems , j u s t - i n - time

m anag em ent sys tems, d i s t r ibuted da ta ne tw orks , advan ced se rvices, in t ra - and in ter-c o r p o r a t e i n f o r m a t i o n f lo w s a r e b a s ed . A d v a n c e d t e le c o m m u n i c a t io n s c a n b e

cons ide red to be the sup por t i ng in f ra s truc tu re o f a cce ss t o i n fo rma t ion t e chno log ie s

(Antonel l i 1988, 1993, 1993a).

Technological spillover: The ex t e rna l i t i e s gene ra t ed by t e chno log ica l i nnova t ions

va ry s ign if ic an tly ac ross sec to r s a ccord ing to t he appro pr i ab i l i t y co nd i t i ons and thein t e r indus t r i a l l i nkages . Wi th in each indus t ry hor i zon ta l sp i l l ove rs a re impor t an t

w hen compe t i t o r s c an ea s i l y imi t a t e a new p roduc t o r a new p rocess . V e r t i c a l

sp i l l ove rs a re re l evan t w hen innova t ions i n t roduced by ups t ream indus t r i e s a f fec t

the pro du c t iv i ty leve ls of users. Bo th h or izo nta l and ver t ica l sp i l lovers seemespec ia l ly impo r t an t t o -d ay in t he ca se o f i n fo rm a t ion t e chno log ie s . In t h is con tex t

the technical eatures o f telecomm unications networks a re re l evan t . Te l ecommunica -t i ons ne tw orks a re fea tu red no t on ly by ma jo r t e chn ica l , pecun ia ry bu t a l so by

subs t an t i a l consumpt ion ex t e rna l i t i e s ; i n fa c t t hey supp ly t he ba s i c empi r i c a lev idence fo r the n o t ion o f ne tw ork ex t erna li ti e s. In i n fo rm a t ion t e chno log ie s t heinc remen ta l i n t ro duc t ion o f a fu ll a r ray o f com plem enta ry and in t e r re l a t ed

innov a t ions i n t he p ro du c t ion p rocess and in the o rgan iza t ion o f f i rms depen dsu p o n t h e p e n e t r a ti o n o f a d v a n c e d t e le c o m m u n i c a t io n s a n d c o m p u t e r s i n th e s y st em .H ig h l eve ls o f d i ffus ion o f adva nced t e l ecomm unica t ions a re t hus l ike ly t o sp read

m a j o r p e c u n i a r y a n d t e c h n i c a l e x t e r n a l i t i e s t o d o w n s t r e a m s e c t o r s - u s e r s o ft e l ecomm unica t ions se rv i ce s - and p o ten t i a l adop te r s o f t hose te chno log ica l andorgan iza t iona l i nnova t ions ba sed upon advanced t e l ecommunica t ions se rv i ce s .

T h e e c o n o m i c a d v a n t a g e s a n e c o n o m i c s y s te m c a n b e n e fi t f r o m t h e g r o w t h a n d

d e v e l o p m e n t o f a n a d v a n c e d t e l e c o m m u n i c a t io n s n e t w o r k c a n b e e s t im a t e d t obe mu ch l a rge r t han ac tua l ma rg ina l m one ta ry revenues o f e ach t e le com m unica t ionsca r ri e r. The ba s i c i s sue o f ne tw ork-ex te rna l i t y i n fa ct app ly t o a va r i e ty o f



8 c. Antonelli

t e l eco m m u n ica t io n s - b ased in n o v a t io n s . Th e p r o d u c t iv i ty o f th e ad o p t io n o f a

s ing le co m pu ter - as well as o f a var ie ty o f com pute r -bas ed p rod ucts and services -i s d r am a t i ca l ly en h an ced b y th e o p p o r tu n i ty to n e two r k in g wi th o th e r co m p u te r s

an d o th e r f i r m s . Ne two r k in g r eq u i r e s an ad v an ced t e l eco m m u n ica t io n n e two r k ,hence ne twork ex terna l i t ies p rov ide the bas ic a rgument to expec t tha t d i f fus ion o f

advanced te lecommunica t ions i s l ike ly to sp read major benef ic ia l e f fec ts on users

o f t e l eco m m u n ica t io n s se rv ice s an d , co n seq u en t ly , t o a l l t h e eco n o m ic sy s t em

(Antonell i 1992) .

I n su m , in f o r m a t io n an d co m m u n ica t io n t ech n o lo g ie s sh o u ld b e r eg a r d ed a s a

new emerg ing techn olog ica l sys tem. A technolog ica l sy s tem is charac te r ized by h ighleve ls o f com plem entar i ty a nd in te r re la tedness am ong d i f fe ren t technolog ies tha t

a r e a t t h e sam e t im e p r o d u c t i n n o v a t io n s a s we ll a s p r o cess in n o v a t io n s , o r g an iza -

t io n a l i n n o v a t io n s an d m o r e b r o ad ly in n o v a t io n s th a t ch an g e th e p r o d u c t io n m ix

of f irms and the i r marke ts. Such an a r ray o f technolog ica l innov at ions i s charac te r izedby a s t rong complementar i ty tha t a f fec ts p roduct iv i ty leve ls . Only when the fu l ly

ar t icu la ted sys tem is in p lace ap pro pr ia te leve ls o f p rod uct iv i ty ca n be genera ted .Yet adopters dec ide to adopt a new technology on ly when i t s p resen t p roduct -

ivi ty levels are higher than those of other exist ing technologies. Moreover , d if fusionis de lay ed by a var ie ty o f lags . Hence , the eme rgence o f a techno log ica l sys tem is

a leng thy p rocess tha t requ i res time, The posi t ive resu l ts o f i ts implem enta t ion wi ll

even tua l ly becom e clear. Co nseq uen t ly , a s ign if ican t scop e fo r an indust r ia l po l icya im ed a t p u sh in g th e d i ff u sio n o f th e co m p o n en t s o f t h e n ew sy s t em is li k ely to m ak e

i t poss ib le fo r the en t i re sy s tem to g rab fas te r the overa l l pos i t ive benef i t s o f i ts

implem enta t ion . Eac h a gen t in i so la t ion i s no t aware , in fac t, o f the pos i t iveex terna l i ty e ffec ts tha t each a do pt io n dec is ion is l ike ly to spur .

Th e n o t io n o f t ech n o lo g ica l sy s t em is em er g in g a s a su b s tan t i a l ad v an ce in th e

eco n o m ic an a ly s i s o f t ech n o lo g ica l ch an g e an d eco n o m ic g r o wth . T ech n o lo g ica lsys tems are m ade of a var ie ty o f sub-sy s tem s and spec if ic technolog ies tha t a re ab leto p r o d u c e a t a m ax im u m leve l o f e ffic iency o n ly w h en a l l th e co m p o n en t s o f t h e

sy s t em a r e in p l ace . Hen ce , t h e d y n am ics o f p r o d u c t iv i ty g r o wth o f eco n o m ic

system s is deep ly a f fec ted by the dyna m ics o f techn ica l sys tems (Antonel l i 1993b , c ).Technolog ica l sys tems can be thought to have a d is t inc t ive l i fe -cyc le : they

eme rge s lowly , a re im plem ented and enr iched , they dec l ine and they f inal ly

su p e r sed ed b y n ew t ech n o lo g ica l sy s t em s . New tech n ica l sy s t em s em er g e w h en n ewtechnolog ies tha t a re ind iv idua l ly more e f fec t ive and product ive than the i r subst i -

tu t e s su p p ly im p o r t an t sco p e f o r f u r th e r im p r o v em en t s o f p r o d u c t iv i ty leve ls w h enasso c ia t ed wi th o th e r t ech n o lo g ie s an d ev en m o r e g en e r al ly w i th o th e r f ac to r s su chas spec if ic sk il ls and in te rm ediary inpu ts . The in t rodu ct ion and ado pt io n o f these

co m p lem en ta r y t ech n o lo g ie s i s it s el f a f ac to r o f im p lem en ta t io n o f th e t ech n o lo g ica lsys tem and , c onseq uen t ly , a fac to r o f fu r ther g ro w th o f p rod uct iv i ty levels,

W h en a n ew t ech n o lo g ica l sy s t em em er g es a cu m u la t iv e p r o cess o f en d o g en o u s

grow th i s thus l ike ly to take p lace a long w i th the in t roduc t ion o f new com plem entarytechnologies and their effect to overal l productivi ty level .

I n co n c lu s io n , wh en an a ly s in g th e r e l a tio n s b e tw een t ech n o lo g ical ch an g e an dp r o d u c t iv i ty g r o wth , i t s eem s ap p r o p r i a t e to f o cu s a t t en t io n o n k ey - t ech n o lo g ie sthat , becaus e of technolog ical oppo rtun ity , technologica l convergencies, technologi-ca l in te r re la tedness and hence techn olog ica l sp i l lover , a re l ike ly to sp rea d h igh leve ls

of pos i t ive ex terna li t ies to the res t o f the eco nom y. W ith in the c lus te r o f newin f o r m a t io n an d co m m u n ica t io n t ech n o lo g ie s , ad v an ced t e l eco m m u n ica t io n s seemto have been s ince the la te seven t ies such a key- technology .




4 . A m o d e l o f d i f fu s i o n a n d p ro d u c t iv i ty g r o w t h

4.1 . Th e hypo theses

A m o d e l o f d i f fu s i o n a n d p r o d u c t i v i t y g r o w t h c a n b e b u i lt d r a w i n g u p o n t h eP o s t - K e y n e s i a n t r a d i ti o n a n d o n t he n e w m o d e l s o f e c o n o m i c g r o w t h a s w e ll a s

u p o n t h e t ech n o l o g y p ro d u c t i o n fu n c t i o n e l ab o ra t ed b y G r i li ch es (19 79 ). W e s u g g es t

t h a t a b e t t e r i n d i ca t o r o f t h e f ac t o r s l e ad i n g t o t h e e f f ect iv e i n c reas e o f e f f ic i en cy an d

h en ce t o t h e i n c reas e o f t h e t o t a l f ac t o r p ro d u c t i v i t y is g iv en b y t h e r a t e s an d l ev e ls

o f d i f fu s i o n o f n e w k e y - t e c h n o l o g ie s . F o l l o w i n g S c o t t 's m o d e l o f g r o w t h w e r e ly o n

g r o s s i n v e s tm e n t s in o r d e r t o a p p r e c i a t e it s ro l e in t h e m o d e r n i z a t i o n o f th e c a p i t a l

s t o c k e m b o d y i n g n e w t e c h n o l o g ie s . P r e v i o u s a n a l y s e s o f t h e e c o n o m i c s o f m o d e r n -

i za t i o n p ro ces s e s i n f ac t s u g g es t t o co n s i d e r ex p l i c it ly t h e ac t u a l d i f fu s i o n b o t h i n

l ev e l s an d i n r a t e s . A l l i n v es t men t s i n f ac t a r e n o t n eces s a r i l y ab l e t o emb o d y t h e

b es t av a i l ab l e t ech n o l o g i e s . Mo reo v e r , r e l y i n g o n t h e l a rg e emp i r i ca l ev i d en ce

a v a i l ab l e w e a s s u m e t h a t t h e d i f fu s i o n o f k e y t e c h n o l o g i c a l i n n o v a t i o n s - r a t h e r

t h a n t h e g e n e ri c a d v a n c e o f t e c h n o l o g y - s u ch a s n e w i n f o r m a t i o n a n d c o m m u n i c a -

t i o n t ech n o l o g i e s can l ead t o an e f fec ti v e i n c reas e o f l ab o r p ro d u c t i v i t y l ev e ls (s ee

A n t o n e l l i e t a l. 1 99 2) . A c co rd i n g t o t h e h y p o t h es es o u t l i n ed , t h e g en e ra l e f f i c ien cy

o f t h e p r o d u c t i o n p r o c e ss a s w e l l a s t h e p a r t i a l p r o d u c t i v i t y o f n e w c a p i t a l g o o d s

a n d m o r e g e n e r a l l y p r o d u c t i o n f a c t o rs t h a t a r e p a r t o f t h e n e w i n f o r m a t i o n

t ech n o l o g y s y s tem a re s i g n if i can tl y a f fec ted b y t h e ex t en t t o w h i ch o t h e r co m p o n en t s

o f th e s y s t em a re a l r ea d y i n p lace .A s i m p l e a n a l y t i c a l m o d e l o f d if f u s io n a n d p r o d u c t i v i t y g r o w t h c a n b e b u i l t

d r a w i n g o n t h e t e c h n o l o g y p r o d u c t i o n f u n c t io n a p p r o a c h e l a b o r a t e d b y G r il ic h e s

(1 97 9). W i t h r e s p e ct t o t h e t e c h n o l o g y p r o d u c t i o n f u n c t i o n o u r h y p o t h e s e s i n f a ct

l ead t o t h e fo l l o w i n g s p ec if i ca ti o n :

Y(t) = A(t)Ka(t)Lb(t)IKC (t) (I)

w h e r e Y = o u t p u t o f t h e I t h fi rm , K = c a p i ta l , I K = i n f o r m a t i o n c ap i t al , L = l a b o r ,

A = g en e ra l e f f i c ien cy p a r am e t e r an d a , b , c a r e t h e p a r t i a l e f f ic i en cy o f r e s p ec ti v e l y

c a p i ta l , l a b o r a n d i n f o r m a t i o n c a p it a l. F o r t h e t i m e b e i n g w e a s s u m e t h a t t h e

p ro d u c t i o n h as co n s t an t r e t u rn s t o s cal e: a + b + c = 1

B e c a u s e o f t h e t e c h n o l o g i c a l s y s te m f r a m e w o r k w e a s s u m e t h a t t h e g e n e r a le f f i c iency is a f fec ted by s ign i f i can t ex tern a l i t ies :

A = f ( I K S T O C K ) (II)

w h e r e I K S T O C K is t h e s t o c k o f i n f o r m a t i o n c a p it a l a l r e a d y in s t a ll e d i n e a c he c o n o m i c s y s t e m .

B e c a u s e o f t h e d if f u s io n a p p r o a c h w e e l a b o r a t e u p o n , w e n o w t u r n t o a n a l y s i n g

t h e d y n a m i c s o f t h e s to c k o f i n f o r m a t i o n c a p i ta l i n th e e c o n o m i c s y st e m . W e k n o w

t h a t s u ch d i f fu s i o n t ak es p l ace i n a t i me p e r i o d o f d ecad es an d fo l l o w i n g a l o g i st i c

p a t h t h a t c a n b e a p p r o x i m a t e d b y a d if f e re n t ia l e q u a t i o n s u c h a s:

d I K S T O C K / d t = b [ I K S T O C K ( N - I K S T O C K ) ] ( l I I )

w h e r e I K S T O C K is th e a d o p t i o n le ve l o f i n f o r m a t i o n c a p i ta l i n a g i v en e c o n o m i c

s y s t em, N is a ce il in g lev e l o f IK S T O C K , t is t im e an d b i s th e r a t e o f d if fu s io n .

By n o w i t is c lea r t h a t a l o n g w i t h t h e i n c reas e o f th e o v e ra l l lev e ls o f ad o p t i o n

o f i n f o r m a t i o n c a p i t a l t h e g e n e r a l e f fi ci en c y o f e a c h p r o d u c t i o n f u n c t i o n s h i ft st o w a r d s t h e r ig h t .



10 C. Antone lli

A s t r o n g e r ca se can b e m ad e wh en we p u t f o r war d th e h y p o th es i s t h a t t h eex terna l it ies engende red by the d i f fusion o f in form at ion cap i ta l a f fec t bo th thegenera l e ff ic iency o f the p ro du ct io n func t ion and the m arg ina l e ff ic iency of

in format ion cap i ta l . In such a case increas ing re tu rns to sca le a re l ike ly to emergea lo n g th e d i f fu s io n p r o cess . Fo r m a l ly w e h av e th e f o llo win g eq u a t io n :

c = g ( I K S T O C K ) (IV )

The para m eter o f the m arg ina l e ff ic iency of in form at ion cap i ta l i s in fact now

f u n c t io n a l ly r e l at ed to th e o v e r a l l leve ls o f ad o p t io n in th e sy s t em o f co m p o n e n t s

of the emerg ing techn olog ica l sys tem. I t i s su f fic ien t to assu m e tha t such a p aram eter

m o v es f r o m a sm a l l v a lu e an d m o r e o r l e s s r ap id ly m o v es u p war d so th a t , ad d ed

to the o the r par t ia l e f ficiency param eters , i t becom es la rger than 1. N ow the sys tem

is l ikely to reac t to a l l increase in the levels o f aggrega te de m and wi th a sup p ly curve

th a t h a s a n eg a t iv e s lo pe . Hen ce , a lo n g w i th d em an d g r o w th th e sy s t em is li k ely toexper ience a redu ct ion in rea l p r ices and , con sequen t ly , fu r ther g row th o f to ta l fac to rp r o d u c t iv i ty ,

W e can n o w see c l ea r ly th a t acco r d in g to o u r h y p o th e ses th e l ife cy c le o f a n ew

technolog ica l sys tem is l ike ly to em erge as the eng ine o f a non - l inear p rocess o f

g r o w th o f to t a l f ac to r p r o d u c t iv ity . Th e d i ff u sio n o f in f o r m a t io n cap i t a l p r o ceed s

a long the con ven t iona l log is t ic pa th and af fec ts cum ula t ive ly the genera l e ff ic iency

of the ec ono m ic sys tem. I t s pos i t ive ef fects, however , a re de lay ed wi th respec t to the

ac tu a l i n t r o d u c t io n o f each s in g le in n o v a t io n an d b eco m e ap p a r en t o n ly wh en th efully ar t iculate technological system is actually in place.

O n th ese b ases o u r em p i ri ca l m o d e l o f l ab o u r p r o d u c t iv i ty g r o w th can b especif ied as fol lows:

g lp = a I ( G I /Y ) + a2 ( D I CT ) + a3 (1 /Y) + a4 ( PA TE NT ) + e (1 )

Th e g r o w th o f l ab o u r p r o d u c t iv i ty is d e t e r m in ed b y th e r a t io o f to t a l i n v es tm en t s

on ou tpu t (as in El t i s 's speci fica tion); the ra tes o f d i f fus ion o f new in fo rm at ion and

co m m u n ica t io n t ech n o lo g ie s ( DI C T) th a t is t h e e ffectiv e sp eed o f p en e t r a t io n o fth ese t ech n o lo g ie sS ; th e ca t ch in g - u p o p p o r tu n i ty ap p r o x im a ted b y th e r ec ip r o ca l

of the leve ls o f G D P per cap i ta (as in Co rnw al l ' s speci fica tion); the tech nolo gy gap

ap p r o x im a ted b y th e in n o v a t io n g en e r a t io n cap ab i l i t y a s sp ec i f i ed b y Fag e r b e r g

(19.87) in term s of pa tents.Eq u a t io n (1 ) sh o u ld c ap tu r e th e cu m u la t iv e e s sen ce o f th e K a ld o r i an l eg acy b y

in tegra t ing the e ffec ts o f a fu lly end oge nou s techn olog ica l change , as expressed byth e in v es tm en t e f f o r t s wh ich a r e m ean t to t ak e in to acco u n t th e q u a l i t a t iv e an d

q u an t i t a t iv e g r o w th o f th e cap i ta l s to ck to g e th e r w i th th e p o s i t iv e co n seq u en ces o f

the e ffec tive ra tes o f d i f fus ion o f new in fo rm at ion technolo gy , und er the co n t ro l o fth e g en e r ic sp i l lo v e r o f t ech n o lo g ica l k n o w led g e f lo win g fr o m ad v a n ced co u n t r i e sto war d s l e s s ad v an ced o n es an d th e t ech n o lo g y - g en e r a t io n g ap .

O u r h y p o th e ses can n o w b e fu l ly a rt i cu la ted :

s Digital telecom munica tions lines data tested the standard epidemic model of analysis of diffusionrates:

log(D/( l-D)) = a + b(t) (5), where D = the n umber of digital lines as a percentage of total

installed telephone lines in each country. Results of the generalized least squares estimates are

draw n from Antonelli (1991) but for the no diffusion cases where a 0 value has been given to the

DICT variable.



New information echnologiesand productivitygrowth 11

i) the levels of labor productivity should be explained by the capital stock and by

the effective levels of penetration of key technological innovations hence the

growth of labor productivity should be explained by the growth of the capital

stock - i.e. the investments - and by the rates of diffusion;ii) the intensity of efforts in the generation of new technologies "alone" as in thetechnology production function tradition is not able to appreciate fully the

effective penetration of innovations in the economic system because of the delaysin the rates of diffusion due to bounded rationality, and imperfect knowledgeof the agents.

iii) gross investment seems to provide a better estimator of the actual introduc-tion in the production process of new technologies than net investment. Net

investment in fact measure only the monetary increase in the stock of capital,but miss the changes in the qualitative composition of the capital stock because

of the substitution of obsolete and less effective chunk of scrapped capital withsuperior, more sophisticated pieces of equipment.

4.2. The empirical est imates

Data on the average rates of growth of labor productivity (glp), GDP per capita (Y)and average investment to GD P ratios (GI/Y) are available for the years 1980-1988

for a large sample of 29 representative countries, both OECD and industrializing

from Summers-Heston (1991), and are shown in table 1. More specifically all OECD

countries for which reliable information were available have been considered as wella large group of newly industrializing countries. A special attention has been paidnot to limit the data set to traditional industrialized countries as it often happens

in empirical analyses that focus on the role of technological change. The global

character of technological change and the fast rates of international diffusion oftechnology go well beyond the boundaries of the OECD area and suggest that in

order to obtain integrity of the data set for our purposes, the inclusion of a reliablesample of newly industrializing countries is necessary.

Data on the diffusion of digital telecommunication lines have been retained as

a reliable indicator of a more general process of diffusion of electronic networking

and more generally of the effective penetration of information and communicationtechnologies in economics systems. Data on the diffusion levels of digital lines on

total telephone lines installed for the same countries in the years 1977 through 1988are drawn from Antonelli (1991). Countries have been considered also when thediffusion process had not yet started. So far our distribution of data can beconsidered as not-trunctated.

Econometric tests of our hypotheses have been conducted on the followingspecification:

glp = a l + a2(GI/Y) + a3(DICT) + e (2)

glp = al + a2(GI/Y) + a3(PATENT) + a4(1/Y) + e (3)

glp = a l + a2(GI/Y) + a3(PATENT) + a4(DICT) + e (4)

glp = al + a2(GI/Y) + a3(PATENT) + e (5)

glp = al + a2(GI/Y) + a 3 ( P A T E N T ) + a4(DICT) + a5(l/Y) + e (6)

where (glp) is the growth of labor productivity as measured by the increase in the



12

Table 1. The data

C. Antonelli

Countries glp GI/Y DICT 1/Y Patent

1 USA 2.100 18 . 3 0 1 5.453E -5 1.7802 Japan 2.900 29 1 .060 8.191E-5 .9123 Germany 1.200 20 . 4 7 4 7.934E -5 .9444 France .900 20 . 4 8 3 8.203 E-5 .3685 UK 2.400 17 . 2 1 8 8,346E-5 .3776 Italy 1.600 21 . 8 8 4 8,517E-5 .1407 Canada 1.900 21 . 2 0 3 6. 14 6E -5 .4278 Austria 1.300 23 0 8.699E-5 .3519 Belgium .600 17 . 5 4 6 8.69 9E -5 .265

10 Denmark 1.000 18 . 2 1 3 8.27 2E-5 .36011 Finland 2.400 24 . 9 7 9 8.09 1E-5 .321

12 Greece ,800 20 0 1.707E-4 .00613 Netherlands .200 19 0 8.720E-5 .43914 Portugal 1.500 27 . 4 0 0 1.879E-4 .00315 Spain 1.000 20 . 7 3 2 1.350E-4 .01816 Sweden 1.900 19 . 8 7 1 7. 69 8E -5 .84517 Switzerland 1.400 24 . 9 7 4 6. 19 0E -5 1.66518 S. Korea 5.700 31 1 .164 1.93 9E -4 .00819 Malaysia .600 28 . 2 6 2 2. 11 6E -4 .00120 Singapore 2.800 32 . 3 6 8 9. 60 0E -5 .01921 Brazil - .200 16 0 2.252E-4 .00222 Turkey 2.400 26 1. 04 4 2 . 7 7 9 E - 4 3.90 5E-423 Thailand 3.500 25 1, 14 8 3 . 4 7 3 E - 4 2.57 0E-424 Srilanka 4.600 27 , 9 8 0 4 . 5 4 5 E - 4 6.112E -525 Mexico - 2.700 22 . 1 8 9 2. 00 2E -4 .00426 Australia 1.400 25 0 1.014E-4 .17527 New-Zealand .100 24 1 .015 1.014E-4 .16628 Taiwan 3.600 28 . 6 0 0 1.752E-4 .07929 Philippines - .60 0 24 .654 .001 .001

Table 2. Results of the econometric estimates of Eqs. 2-6

(2) (3) (4) (5) (6)

a - 2.214 - 3.249 - 2.677 - 3.377 - 2.398GUY 0.134 0.215 0.148 0.208 0.150(t) (2.036) (3.307) (2.146) (3.247) (2.208)PATENT - 0.454 0.420 0.634 1.220(t) (0.722) (0.735) (1.079) (0.216)I/Y - 0.132 - - 0.180(t) (0.851) (1.242)DICT 1.475 - 1.370 - 1.548~2 (2.086) (1.890) (2.116)

.316 .225 .304 .235 .320

F 7.467 3.717 5,070 5.294 4.296

ratio GDP/worker, as calculated in the Penn World Table (mark 5) for the years

1980-88 (Su mmer s-H est on 1991); (GI/Y) is the average ratio of total inv estme nt to

GDP for the years 1980-88 (Summers and Heston 1991); (DICT) is the parameter

of the rate of diffusion of digital lines in each coun try as estimated by equa tio n (10)




fo r the yea rs 19 77-1987 ; (PA TE N T) is t he ra t i o o f t o t a l U . S . pa t en t s de l ive red

in t he yea rs 1980-19 88 to na t iona l s o f e ach cou n t ry t o t o t a l pop u la t i on in mi l l ions

(U.S . D ept . of Com m erc e 1991); ( I /Y) i s rec iproca l of the levels of rea l per ca pi ta

i n c o m e i n 1 9 8 5 ( S u m m e r s a n d H e s t o n 1 99 1)Eq ua t io n (2) is t he e l emen ta ry econ om e t r i c spec if i ca t ion o f ou r hy po the s i s an di t con t ra s t s t he a l t e rna t ive spec if ic a ti ons . Equ a t ion (3 ) is t he s t anda rd t e chno logy -gap m od el an d i t mak es poss ib le to assess the re la t ive e ffec ts of the e ffec tive d i f fus ion

of key- t echno log ie s w ith re spec t t o t he ro l e o f the ca t ch ing-up va r i ab l e and w i thre spec t t o i nnov a t ion capab i li ti e s . Equ a t ion (4) m akes poss ib l e to con t ro l t he e ffec t

o f the d i f fus ion o f key- t echno log ie s w i th re spec t t o t he ca t ch ing-up va r iab l e.

Equa t ion (5 ) makes poss ib l e t o a s se s s t he re l a t i ve e f fec t o f t he " t e chno logy gap"va r i ab l e , a ccord ing to t he spec i f ic a t ion o f Fag e rbe rg (1987) , w i tho u t t he con t ro l o f

the spec if ic d if fus ion ra tes of a key- tech nolog y such as ad van ced te lecomm unica t ion .

F ina l ly Eq. (6) pro vide s a fu ll spec i f ica t ion of a ll the v ar iables con s idered .Resu l t s of ord inar y leas t squares es t imates of Eqs. (2)-(6) a re l i s ted in T able 2 .

To ta l va r i ance exp la ined i s goo d fo r a s t anda rd c ros s -co un t ry te st . The s ign if ic ance

of t he F s t a t is t ic s i s abo ve 95~ . D IC T and G I /Y a re s t rong ly s ign if ic an t i n all t he

a l te rna t ive spec i f ica t ions proposed.These re su lt s conf i rm tha t t he ra t e s o f d i f fus ion o f a r ad i ca l k ey- t echn o logy such

as advanced t e l ecommunica t ions have gene ra t ed impor t an t ex t e rna l i t i e s t ha t havebeen spi ll ing t h rou gh the en ti re e conom ic sys t em w i th s t rong p os i t ive advan tages

on the ove ra l l r a t es o f g row th o f l abo r p roduc t iv i t y . The e s t ima ted p a ram e te r o f

the con t r ibu t ion o f t he ra te s o f d i f fus ion o f adva nced t e l ecom m unica t ions t o l abor

p r o d u c t i v i t y g r o w t h , w i th in t h e c o n t r o l o f a P o s t - K e y n e s i a n f r a m e w o r k o f a n a ly s isi s in fac t s igni ficant and re levant. A ccord ing to o ur hyp othese s , th is resul t conf i rms

tha t mu ch o f t he w e igh t g iven to g ross inves tm en t e f fo rt s i n t he Po s t -K e yne s i anl i t e ra tu re i n exp la in ing p roduc t iv i t y g row th shou ld i n fac t be recogn ized a s t he

ac tua l co nt r ib ut io n of e ffec tive d i f fus ion of key- techn ologies . Inv es tm ent e ffor t s a reto a l a rge ex t en t an impe r fec t p rox y fo r t he ado p t ion capab i l i t y o f a coun t ry .

The co n t ra s t be tw een the s t a t is t ic pe r fo rm ances o f t he i nves tmen t e f fo r t s

va r i ab l e w i thou t t he con t ro l o f the d i f fus ion o f a k ey- t echn o logy a s i n Eq . (5 ) and

un der the co nt ro l of the d i f fus ion var iable as in E qs . (2) , (3), (4) and (6) sho ws tha t

the exp lana to ry po w e r a s w e ll a s t he quan t i t a t ive s iz e o f t he pa ram e te r a re e roded .

Th i s w ou ld sugges t t ha t t he i nves tmen t e f fo r t va r i ab l e is in fa c t ab l e t o c ap tu re som eof t he d i f fus ion a spec t s a s p red i c t ed by the P os t -K eyn es i an app roach . Th e s t rongand s igni ficant perform ance s o f the d i f fus ion var iable , howev er , do co nf i rm the need

of a s epa ra t e and w e l l-de fined ke y- t echn o logy d i f fus ion va r i ab l e .I t is in te res t ing to c on fron t the resul ts of DI C T wi th tho se of: i) the gener ic

ca t ch ing-up op po r tun i ty va r i ab l e (I /Y ) ; i i) t he i nnova t ive capab i l it y o f a cou n t ry a s

m e a s u re d b y P A T E N T .

Both the " ca t ch ing-up " va r i ab l e and the innov a t ive capab i l it y va r i ab le pe r fo rmve ry poor ly i n a l l t he spec i f i c a t i ons cons ide red . The va r i ab l e ( I /Y ) t ha t w ou ldm easure t he oppo r tun i t i e s fo r pos i ti ve sp i ll ove r o f t e chno log ica l know -ho w f rom

more advanced count r ies to indus t r ia l iz ing ones i s in fac t s igni f icant ly assoc ia tedw i th t he i nnova t ive capab i l i t y (PA TEN T) , bu t ne i the r ones a re s ign i f i c an t ly

assoc ia ted wi th the labor produc t iv i ty growth. More spec i f ica l ly , we see tha tP A T E N T is never s ignif icant: the S tu den t ' s t is a lwa ys be low s igni f icance level in

a l l the spec i f ica t ions cons idered . This sugges ts tha t the var iable has no col inear i typro ble m s wi th the o th er techno logica l var iables cons idered , tha t a ffec t the s ta ti s t ica lpe r fo rmances . T hese re su l ts migh t sugges t tw o cons ide ra t i ons .



14 C. Antonelli

First, technological spiUover is unlikely to spread quickly and freely acrosscountries, strong investment efforts and an effective adoption capability of new

technologies are necessary. Technological innovation cannot be considered as a free

good. It is interesting to note that at a closer statistical analysis of these results thepoor performances of PATENT are significantly influenced by the composition ofthe sample of countries. More specifically, the exclusion from the sample of newly

industrializing countries such as Taiwan and Korea has positive effects on thestatistical performances of PATENT. This seems to suggest that while productivity

growth of industrialized countries is significantly influenced by the innovationcapability as measured by the capacity to generate original innovations, the

productivity growth of industrializing countries can take advantage of the absorp-tion of foreign technology, provided that investment efforts are made and fast rates

of diffusion are achieved. (Amsden 1989).

Second, innovative capability grows along with revenue levels but per se haslittle effect on the growth of labor productivity. The introduction of technological

innovations to the bottom-line, that is the actual adoption, matters more than the

generic capability of generating new technological knowledge in enhancing labor

productivity growth. When confronting the poor results of the catching-up variable

in a regression equation that test data for the eighties with results on data collectedfor the seventies, one might suggest that the free spillover of technologicalknow-how has become even less easy in the recent years (Cornwall 1976).

In conclusion, these results confirm our argument that the effective diffusion

rates of key-technologies associated with the intensity of gross investments, provide

a much better and more reliable account of the positive dynamics of newtechnologies within economic systems, than the innovative capability per se and thestandard indirect "dummy" of the international diffusion of new technologies

usually taken into account such as the catching-up opportunities.

5 . C o n c l u s i o n s

The original notion of innovation introduced by Schumpeter includes the introduc-

tion of new products and new processes as well as the use of new intermediary inputs,

new organizational structure within firms and among firms, the entry in newmarkets. The notion of technological innovation currently used in the recent debateon technological change, economic growth and industrial competitiveness focussesattention mainly on product innovations and pays much less attention to the other

four forms of innovation detected by Schumpeter. In fact, the introduction of newcapital goods embodying technological innovations in the production process ofa given company is itself an important innovation as well the choice of newintermediate inputs and new structural organizations.

The skills and requirements necessary to generate product innovations on onehand and to introduce process innovations on the other are significantly different.

The former center upon high levels of research and development activities both bymeans of the formal development of research capacity within the firm and on theaccess to the scientific and technological knowledge produced by universities andscience centers. The latter require high levels of search activities and tacit knowledgenecessary to assess all the relevant information about the new technologies madeavailable on the market and to choose whether they can fit into the currentstructure of their business. Moreover, high levels of investments are necessary for




f i r m s t o a d o p t t i m e l y n e w a v a i l a b l e p r o d u c t i n n o v a t i o n s g e n e r a t e d b y u p s t r e a m

i ndus t r i e s . 9

T h e a d o p t i o n o f n e w c a p it a l g o o d s a n d i n t e rm e d i a r y p r o d u c t s e m b o d y i n g

p r o d u c t i n n o v a t i o n s , h o w e v e r , s h o u l d n o t b e r e g a r d e d a s th e a u t o m a t i c o u t c o m e o ft h e i n v e s t m e n t p r o c e s s . R e l e v a n t s e a r c h a n d i n f o r m a t i o n a c t i v i t i e s a r e t o b e

p e r f o r m e d b y fi rm s t h a t l o o k f o r n e w o p p o r t u n i t i e s o n t h e m a r k e t s f o r n e w p r o c e s s e s

a n d n e w i n t e r m e d i a t e p r o d u c t s . S o f a r, th e d i f fu s io n o f n ew p r o c e s s e s a n d n e w

i n t e rm e d i a r y p r o d u c t s s h o u l d b e c o n s i d e r ed a s th e o u t c o m e o f a n a c t u al i n n o v a t i o n

c a p a c i t y o f d o w n s t r e a m f ir m s t h a t s p e c ia l iz e i n p r o d u c t s t h a t a r e s o ld m a i n l y t o

f in a l c o n s u m e r s .

A c c o r d i n g t o o u r t e n t a t i v e i n t e r p r e t a t i o n u p s t r e a m f i r m s s p e c i a l i z i n g i n t h e

p r o d u c t i o n o f c a p i ta l g o o d s a n d i n t e r m e d i a t e p r o d u c t s , e m b o d y i n g h i g h le v el s o f

t e c h n o l o g i c a l a d v a n c e , g e n e r a t e r e l e v a n t p e c u n i a r y s p i l l o v e r s t h a t c a n b e a p p r o -

p r i a t e d b y d o w n s t r e a m f i r m s t h a t u s e t h o s e i n n o v a t e d c a p i t a l g o o d s a n d i n t e r -m e d i a t e in p u t s a s c o m p l e m e n t a r y in p u t s i n t h e i r o w n p r o d u c t i o n p r o c e s s. T h e

a p p r o p r i a t i o n o f th e f l o w o f p e c u n i a r y e x t e rn a l it ie s is h i g h er , t h e h i g h e r t h e c o m -

p e t i t io n o n u p s t r e a m m a r k e t s is. C o m p e t i t i o n i n u p s t r e a m i n d u s tr i e s b r o u g h t a b o u t

b y t h e e n t r y o f n e w i m i t a t o r s i n fa c t r e d u c e s t h e q u a s i - r e n t s a s s o c i a t e d w i t h t h e

i n t r o d u c t i o n o f p r o d u c t i n n o v a t i o n s a n d , c o n s e q u e n t l y , i n c re a s e s th e l ev e ls o f

p e c u n i a r y e x t e r n a li ti e s fo r d o w n s t r e a m u s er s.

T h e a p p r e c i a t i o n o f t h e r o le o f t h e m o d e r n i z a t i o n p r o c e s s b a s e d u p o n t h e

d i ff u s io n o f i n n o v a t i o n s a n d n e w i n t e r m e d i a t e p r o d u c t s i n th e p r o d u c t i o n p r o c e s s

is e s p e c i a ll y i m p o r t a n t t o g r a s p t h e r o l e o f t e c h n o l o g i c a l c h a n g e i n i n d u s t r i a l

e c o n o m i e s c h a r a c t e r i z e d b y s m a l l fi rm s . T h e s m a l l si ze o f m a n u f a c t u r i n g f ir m sm a k e s i t v e r y d if fi cu l t t o r e l y o n r e s e a rc h a n d d e v e l o p m e n t e x p e n d i t u r e s a n d ,

c o n s e q u e n t l y , o n t h e g e n e r a t i o n o f p r o d u c t i n n o v a t i o n s a s a c o m p e t i t i v e t o o l. T h e

m i n i m u m e f f ic i e n t s iz e f o r c o n d u c t i n g e f f ic i en t r e s e a r c h a n d d e v e l o p m e n t a c ti v i ti e s

is in f a c t v e r y h i g h a s w e l l a s t h e l e v e ls o f r is k s a s s o c i a t e d w i t h t h e g e n e r a t i o n o f n e w

p r o d u c t s . A t e c h n o l o g i c a l c h a n g e b a s e d o n f a s t r a te s o f d i ff u si o n , e n h a n c e d a n d

m a d e p o s s ib l e b y h i g h le v el s o f i n v e s t m e n t i s i n s te a d m u c h m o r e a p p r o p r i a t e d t o

c o u n t r i e s w i t h h i g h l e v e ls o f r e g i o n a l c l u s t e r i n g o f s p e ci a li z e d s m a l l f i rm s t h a t a r e

a c t iv e in c o m p l e m e n t a r y p r o d u c t s s o t o d e v e l o p a c h a r a c t e r i s ti c i n d u s t ri a l s y s t em

b a s e d o n h i g h l e v e ls o f i n d u s t r i a l c o o p e r a t i o n , fa s t r a t e s o f d i f f u s io n a n d h i g h l e v e ls

o f s p e c i a li z a ti o n in t h e " a d v a n c e d " p r o d u c t i o n o f " m a t u r e " f in a l p r o d u c t s .T h e t r a d i t i o n a l n o t i o n o f m a t u r e i n d u s tr i e s a s s o c ia t e d w i t h t h e s e p r o d u c t s ,

h o w e v e r , s e em s l es s a n d le ss a p p r o p r i a t e w h e n o n e t a k e s i n t o a c c o u n t t h e s i g n if ic a n t

r o l e o f t h e m o d e r n i z a t i o n p r o c e s s c h a r a c t e r i z e d b y t h e f a s t d i f fu s i o n o f t e c h n o l o g i c a l

a n d o r g a n i z a t i o n a l i n n o v a t i o n s , c o n s i s t i n g m a i n l y i n o r i g i n a l a p p l i c a t i o n s a n d

d e v e l o p m e n t s o f n e w i n f o r m a t i o n t e c h n o lo g i e s b a se d o n t h e b l e n d in g o f c o m p u t e r s

a n d t e l e c o m m u n i c a t i o n t h a t h a v e c h a n g e d in d e p t h t h e o v e r a ll l ev e ls o f o v e r a l l

e f fi ci e nc y o f t h e p r o d u c t i o n o f f in a l g o o d s .

9 The relationship betw een investment and adoption of innovated capital goods appears centralto ou r approach. Suc h a relationship highlights a micro-macro l ink which has n ot yet been fullyelabo rated. Mo re specifically,we claim that recent advances in the m icroeconom icsof technologicalinnovation can be integrated in a Verdoorn-Kaldo r-Salter approach w ith evident advantage. Sofar the Verdo on Law can be considered the result of fast rates of adoption of available innovationswhich occur in cond ition of rapid econom ic growth. In fac t, available innovations are likelyto diffuse faster within the econom ic system wh en high rates of econom ic growth mak e it po ssibleto increase the flo w of investmen ts. Faster rates of adoption in turn co ntribute to increaseproductivity rates.



16 C. Antonelli

Acknowledgements. The comments of Erik Bohlin, Marc Ivaldi, Angus Maddison, Brigitte Preissland two anonymous referees to previous versions of the paper are acknowledged as well as thefinancial support of M.U.R.S.T. National Funds.

References

Abramovitz M (1989) Thinking about Growth. Cambridge University Press, CambridgeAmsden AH (1989) Asia's Next Giant. South Korea and Late Industrialization.Oxford University

Press, OxfordAntonelli C (1988) New information, technology and industrial change. The Ital ian case. Kluwer,

BostonAntonelli C (1991) The Diffusion of Advanced Telecommunications in Developing Countries.

OECD, ParisAntonelli C (ed) (1992) The Economics of Information Networks. Elsevier North Holland,

AmsterdamAntonelliC (1993) The Dynamics of Technological Interrelatedness: In: Foray D, Freeman C (eds)

The Case of Information and Communication Technologies. Technology and the Wealth ofNations. The Dynamics of Constructed Advantage. Frances Pinter, London

Antonelli C (1993a) Complementarity and Externalities in TelecommunicationsDynamics. Int JIndustrial Organization 1 : 437-448

Antonelli C (1993b) Investment Productivity Growth and Key-technologies. The Case ofAdvanced Telecommunications. Manchester School 61:386-397

Antonelli C (1993c) Investment and Diffusion in Telecommunications.J Econ Behavior Organiza-tion 20:227 246

Antonelli C, Petit P, Tahar G (1989) Technological Diffusion and Investment Behavior: The Caseof the Textile Industry. Weltwirtschaftliches Archiv 125:782-803

AntonelliC, Petit P, Tahar G (1992)The Economics of Industrial Modernization. Academic Press,Cambridge

Cornwall J (1976) Diffusion Convergence and Kaldor's Law. Econ J 86:307-314David PA (1985) Clio and the Economics of QWERTY. Am Econ Rev 75:332-337David PA (1987) Some New Standards for the Economics of Standardization in the Information

Age. In: Dasgupta P, Stoneman P (eds) Economic Policy and Technological Performance.Cambridge University Press, Cambridge

Dosi G (1988) Sources Procedures and Microeconomic Effects of Innovation. J Econ Literature26:1120-1171

Eltis WA (i 971) The Determination of the Rate of Technical Progress. Econ J 6 I: 502- 524Fagerberg J (1987) A Technology Gap Approach to Why Growth Rates Differ. Res Policy

16:87-99Frankel M (1955) Obsolescence and Technical Change in a Maturing Economy. Am Econ Rev45:296-319

Freeman C (1982) The Economics of Industrial Innovation. 2nd edn. Frances Pinter, LondonFreeman C, Clark J, Soete L (1982) Unemployment and Technical Innovation. Frances Pinter,

LondonGriliches Z (1957) Hybrid Corn: An Exploration in the Economics of Technical Change.

Econometrica 25:501-522Griliches Z (1979) Issues in Assessing the Contribution of Research and Development to

Productivity Growth. Bell J Econ 10: 92-116Griliches Z (I 990) Patent Statistics as Economic Indicators. J Econ Literature 28:166 l-1707Hirschman AO (1958)The Strategy of Economic Development. Yale University Press, New Haven

Kaldor N (1957) A Model of Economic Growth. Econ J 67:591-624Kaldor N (1961) Capital Accumulation and Economic Growth. In: Lutz V (ed) The Theory of

Capital. Macmillan, LondonKaldor N, Mirrlees J (1962) A Model of Economic Growth. Rev Econ Studies 29:174-192Kaldor N (1966) Causes of the Slow Rate of Growth of the United Kingdom. An Inaugural Lecture.

Cambridge University Press, CambridgeLeft NH (1984) Social Benefit-Cost Analysis and TelecommunicationsInvestment in Developing

Countries. Information Econ Policy 1:217-227Mansfield E (1961) Technical Change and the Rate of Imitation. Econometrica 29:741-766

9 Mc Combie JSL (1983) Kaldor's Laws in Retrospect. J Post-Keynesian Econ 5:414-429



N e w i n f o r m a t io n t e c h n o l o g i e s a n d p r o d u c t i v i t y g r o w t h 17

M o n k P ( 19 8 9) T e c h n o l o g i c a l C h a n g e i n t h e I n f o r m a t i o n E c o n o m y , F r a n c e s P i n t e r , L o n d o nO E C D ( 19 90 ) M a i n E c o n o m i c I n d i c a t o r s : H i s t o r i c a l S t a ti s ti c s . P a r i s

R o m e r P M ( 19 8 6) I n c r e a s i n g R e t u r n s a n d L o n g - R u n G r o w t h . J P o l i t ic a l E c o n 9 4 : 1 0 0 2 - 1 0 3 7

R o m e r M ( 19 8 7) G r o w t h B a s e d o n I n c r e a s i n g R e t u r n s D u e t o S p e c i a li z a ti o n . A m E c o n R e v

7 7 : 5 6 - 6 2R o m e r P M ( 19 9 0) E n d o g e n e o u s T e c h n o l o g i c a l C h a n g e . J P o l i t i c a l E c o n 9 8 : 7 1 - 1 0 2R o s e n b e r g N ( 19 7 6) P e r s p e ct i v e s o n T e c h n o l o g y . C a m b r i d g e U n i v e r s it y P r es s , C a m b r i d g eR o s e n b e r g N ( 19 8 5) In s i d e t h e B l a c k B o x . C a m b r i d g e U n i v e r s i t y P r e s s, C a m b r i d g e

S c h e r e r F M ( 19 86 ) I n n o v a t i o n a n d G r o w t h . S c h u m p e t e r i a n P e rs p e c ti v e s. M I T P r e s s, C a m b r i d g eS c o t t M F G ( 19 8 9) A N e w V i ew o f E c o n o m i c G r o w t h . C l a r e n d o n P r e s s, O x f o r dS o e t e L (1 9 87 ) T h e N e w l y E m e r g i n g I n f o r m a t i o n T e c h n o l o g y S e c t o r. In : F r e e m a n C , S o e t e L

(eds) Tech nolog ica l Cha nge and Ful l Em ploym ent . Bas i l B lackwell , Oxfo rdS o u n d e r R J , W a r f o r d J J , W e l l e n i u s B (1 98 3 ) T e l e c o m m u n i c a t io n s a n d E c o n o m i c D e v e l o p m e n t .

J o h n s H o p k i n s U n i v e r s i t y P r e s s, B a l t im o r e

S u m m e r s R , H e s t o n A (1 9 91 ) T h e P e n n W o r l d T a b l e ( M a r k 5): A n E x p a n d e d S e t o f I n t e r n a t i o n a l

Co m par i son s , 1950-1988 . Q uar te r ly J Econ 106:365-368S y l o s L a b i n i P ( 1 98 5 ) T h e F o r c e s o f E c o n o m i c G r o w t h a n d D e cl in e. M I T P r e s s, C a m b r i d g eT h i r l w a l l A P ( 1 98 3 ) A P l a i n M a n ' s G u i d e t o K a l d o r ' s G r o w t h L a w s. J P o s t - K e y n e s i a n E c o n

5:345 358U n i t e d N a t i o n s ( 1 98 9 ) S t a t is t i c a l Y e a r b o o k . N e w Y o r kU . S. D e p t . o f C o m m e r c e (1 9 91 ) P a t e n t i n g T r e n d s i n t h e U n i t e d S t a te s . S t a t e C o u n t r y R e p o r t

1963- 1990 . W ashin g ton

Documents

[ANT95] no Antonelli - Diffusion of Information Technologies and Productivity Growth