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Multiplant Firms and Innovation Adoption and Diffusion

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  • Richard A. Jensen

Abstract

A new theoretical explanation is provided for the empirical observation that large firms usually adopt sooner, although there are notable exceptions. The analysis focuses on the adoption of an innovation of uncertain profitability by a large firm with two plants and a small firm with one. Marginal production costs are increasing in each plant, and economies of multiplant operation are possible. These have conflicting effects on the incentive to adopt. The large firm benefits more from adopting a success. However, if an adopter must shut down a plant to learn about the innovation, the loss of multiplant economies reduces the large firm's incentive to adopt. Absent multiplant economies, the large firm is more likely to lead a diffusion because its greater return from a success dominates. However, the small firm is more likely to lead a diffusion if there are multiplant economies and the large firm's learning cost disadvantage dominates.

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  • Richard A. Jensen, 2004. "Multiplant Firms and Innovation Adoption and Diffusion," Southern Economic Journal, John Wiley & Sons, vol. 70(3), pages 661-671, January.
    • Handle: RePEc:wly:soecon:v:70:y:2004:i:3:p:661-671
    DOI: 10.1002/j.2325-8012.2004.tb00595.x
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    Cited by:

    1. Sierdjan Koster, 2007. "The Entrepreneurial And Replication Function Of New Firm Formation," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 98(5), pages 667-674, December.
    2. JiWen Chai & LiHao Wang, 2023. "Evolutionary game analysis of big data discriminatory pricing diffusion based on the supervision of relevant interest parties," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2094-2101, June.

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