Technology diffusion can loosely be defined as the manner in which specific technology is adopted by a wider population. The speed at which this happens and whether diffusion occurs varies depending on a number of factors such as the quality and nature of the original innovation, the manner in which information on the original innovation is disseminated, and how the public interest is channeled towards the new technology. Information on a disruptive innovation that has been released into the open usually diffuses very quickly. However, with some exceptions such as the iPhone, most innovations do not spread throughout their targeted market in the same way as newspapers, magazines, or television shows do.
There are many factors that can contribute to the rate of technological diffusion. These include the nature of the innovator’s business model, the size and scale of the original innovation and its impact on society, and the level of government support for the new technology. Diffusion can also occur unintentionally, such as when corporations that create a new technology to compete with larger companies for the sole purpose of extending their own market share. Sometimes, diffusion is the result of technology following technology.
There are two main ways that novel technologies are diffused into the wider culture. Diffusion through novelty depends on the ability to innovate on a large scale. Novel technologies to create new ideas and new markets. The larger the market segment served, the easier it is for a new idea or technology to become established as part of social practices and thought patterns. This is typically seen in technological systems such as the Internet where, through the widespread use of online services, novel and technically savvy people have learned to interact on a much larger scale than would have been possible without the widespread access to the Internet.
Technological diffusion also occurs through the diffusion of existing practices and ideas. Diffusion through existing practices and ideas tends to occur when the same practices and ideas are adopted by many different organizations or groups over time. An example of this is the incorporation of statistical methodologies by different academic institutions over time. Similarly, the absorption of technological innovations is highly dependent on the availability of these innovations.
Technology diffusion can either increase productivity or decrease productivity. Either way, it has both negative and positive effects. In the highly developed world, technological change tends to increase productivity in the short term because new innovations dramatically improve overall product quality at a minimal cost. Productivity growth, however, slows down as a result of diffused innovations becoming standard practice. This is why developed countries with extensive market networks still outperform those without such markets.
On the flip side, the diffusion of technology can decrease overall economic growth because it depresses investment in research and development. One can therefore ask: Why do some countries invest more in research and development when that same country can utilize that money for more pressing needs? And what about those developing countries with poor infrastructure, who can hardly afford to spend on research and development? The answer is clear: In developing countries, technology transfer is driven by need. Simply put, governments in developing countries need the technology to develop their economies. If those governments could access the resources necessary to properly fund R&D then they would be able to properly invest in technology.
Unfortunately, technological diffusion is not an easy process. On the one hand, there is a diffuse technology landscape. On the other, there are also winners and losers. Those firms that extract value from this landscape quickly gain an upper hand because they are the only ones that are able to make use of new technologies quickly and effectively.
As emerging market economies develop more quickly than their more developed counterparts, it becomes increasingly difficult for less developed countries to properly utilize new technologies. It becomes harder for less well-off nations to access capital for the r&d. And finally, it becomes more difficult for them to properly implement their own technology policies. This is why emerging market economies have been lagging behind in recent years. With globalization becoming evermore prevalent, it is important for developing nations to realize that they cannot lilly-bean their way to technological success.