The Importance of Adopting New Technologies

Title:
An Exploration of Technology Diffusion

Authors:
Diego A. Comin and Bart Hobijn 

Publisher:
Harvard Business School, Working Paper No. 08-093

Date Published:
April 2008

A nation’s ability to adopt new technologies is paramount, affecting everything from the cost of producing capital goods to per capita income. According to this paper, the rapid economic growth of Japan after World War II and of the East Asian “tigers” — Singapore, Hong Kong, Taiwan, and South Korea — in the 1990s was largely a function of their ability to quickly adopt new technologies such as the Internet and innovative steelmaking processes. Latin American countries, conversely, were relatively slow in their adoption of these same technologies, and saw a drop in per capita income over the same periods. To make their case about the importance of adopting new technologies, the authors examined the spread of 15 seminal technologies, including the invention of steam ships and the arrival of cellular telephones, in 166 countries over the last 200 years. Their findings suggest that new technologies have been adopted more quickly over the last three decades, and that variations in the rate of adoption account for at least a quarter of the differences in per capita income among nations. For instance, sub-Saharan Africa took 62 years to adopt the telephone and 38 years to embrace the automobile, but in more recent times, took only six years to start using cell phones and the Internet. If this trend of acceleration continues, it could facilitate a further reduction of the prosperity gap between developed and developing countries.

Bottom Line:
Technology adoption, the cost of producing capital goods, and per capita income growth may be inextricably linked. As a result, to compete in today’s global economy, countries must learn how to quickly leverage new technologies to ensure that their workforces remain competitive.