The Diffusion of New Technology and the Evolution of Industry Structure: The North American Maritime Industries Since c.1789

University Of Houston, Houston TX

Investigators

Abstract

This research program is concerned with empirical investigations of the diffusion of new technology, the evolution of industry structure, and firm survival, all in the context of the North American merchant shipbuilding and merchant shipping industries from c.1789 to the twentieth century. The two main pur-poses of this project are: (1) to test between two competing theories of technological diffusion based on vintage-specific human capital and on learning, and (2) to study patterns of industry evolution and the determinants of firm survival with the particular focus of conducting discriminating tests between recent models of industry shakeouts. These tests will be conducted using new panel data on US shipyards and Canadian shippers, and on a large dataset of individual wage contracts struck between mariners and their employers on voyages leav-ing Canadian Atlantic ports. The data span periods of between 80 and 120 years. The Canadian data were recently made available to researchers, while the US data will be constructed from primary sources. These data are uniquely valuable for the study of technology because they identify the precise technology em-ployed by firms and the precise technology with which employees were working. Tests of theories of diffusion will focus on the discriminating predictions arising from models in which human capital is specific to technology of a given vintage, and those in which individual firms and workers learn about, and expend resources in order to switch to, new technologies. At the firm level, the vintage-specific human capital model predicts a negative correlation between the rate of technological diffusion and the variance of technologies in uses, while the learning model predicts a positive correla-tion. At the individual worker level, the vintage-specific human capital model predicts a steeper age-earnings profile for employees matched with recent vintages of technology, but that expected lifetime earnings for all workers are the same. The learning model, in contrast, predicts higher expected lifetime earnings for workers who master new technologies earlier. Recent theories of industry evolution have focused on the shakeout, a robust feature of the industry life cycle in which firm exit rates rise dramatically in a short period of time. Several recent studies have explained the shakeout in terms of differential success in adopting new technologies, while others have argued that variations in exit rates are simply a result of earlier variations in entry rates. Among studies arguing for the importance of technology, the role of firm scale has been treated differently. The research focuses on two main lines of inquiry: First, to what extent does the adoption of new technology matter for firm survival? Put another way, is firm age a sufficient statistic for firm growth and survival, or does technology choice matter? Second, is current scale an important indicator of the probability that a firm will eventually succeed in adopting new technology? These questions will be addressed using the panel of shipyards to measure the effects of firm size. firm age, and current technology on firm growth and sur-vival.