Technology Diffusion and Public Policy

A useful typology of technological change is provided by the Schumpeterian trilogy: invention (the generation of new ideas), innovation (the development of those ideas through to the first marketing or use of a technology) and diffusion (the spread of new technology across its potential market). Until recently, policy schemes in most OECD countries have tended to focus predominantly on the invention and innovation, or science and R&D, end of this technology spectrum (see e.g. Limpens et al., I 992). Although it is generally realised that it is the process of diffusion, or use of technology that creates productive potential and competitiveness, policy initiatives have largely bypassed opportunities to improve the diffusion process. If this may seem misplaced emphasis, it does in fact reflect the state of the academic literature which is wide ranging and extensive as it relates to policies on R&D, but small and fragmented as regards policies on diffusion. Currently a gradual reorientation of policy direction toward diffusion seems to be taking place. The US and UK governments, for example, have recently proposed major technology policy initiatives that, despite differences in emphasis, both stress the importance of creating an infrastructure conducive to a rapid spread of awareness and knowledge of innovations. We argue that, although sensible in themselves, such policies may be too limited in scope and that a broader policy stance may be needed. This paper has two main objectives. The first is to provide an overview of why policy intervention in the diffusion process may be desirable and what form it might take. This discussion is rather long, since to the best of our knowledge there is no published systematic synthesis of the diffusion policy literature (though see Stoneman (I987) for an earlier attempt). The second aim is to look at actual diffusion policies and their impacts. To make the task manageable we are restricting this paper to a discussion of the diffusion of new process technologies. Although similar issues apply to new consumer technologies these are not explicitly addressed. We also consider diffusion policy only within the context of a given institutional and macroeconomic environment. Although it may well be that the supply of skilled manpower, the nature of the capital market, animal spirits and entrepreneurship, fiscal and monetary policies will all impact upon the diffusion path, improvements in these areas will also impact upon a whole host of other aspects of the economy's performance. To use a plea for diffusion policy as a rationale for changes in such areas would be equivalent to the tail wagging the dog, and thus they fall outside the remit of this paper.