An Agent-Based Computational Economics Approach To Technology Adoption Timing And The Emergence Of Dominant Designs

Abstract

Dominant technology designs emerge as the sum of adoption decisions across many firms. We take the position that if certain factors drive adoption by an individual firm, then in the aggregate, they may also illuminate the conditions under which a particular dominant design might emerge. In order to show this, we develop an agent-based computational model to explore linkages between firm specific, industry, and environmental factors, such as knowledge overlap, firm size, environmental uncertainty, and the scope of returns to adoption. We show that the significance of these factors varies with the stage of the technology contest. Early in the process, firms that have a compelling reason to adopt (such as to avoid obsolescence of key resources) choose to enter to create momentum for a particular approach. Other firms, due to indifference, inability or uncertainty, may defer until outcomes are clearer or choose not to adopt at all. More importantly, what constitutes a compelling reason for adoption varies with the nature of the firms that lead as innovators and the external environmental factors. On a broad scale, strong regularities in adoption timing and characteristics of technology winners emerge from the analysis.