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Technological diffusion is fraught

It is easy to forget just how long it can take for an invention to become a pervasive technology. Even the most brilliant idea can take time before it is widely adopted.

The steam engine provides an instructive example. It became an important technology in the Industrial Revolution from the mid-eighteenth century onwards. But there are accounts from Ancient Greece of an early steam engine, the aeolipile or Hero’s Engine, in the first century of the Common Era. In that case a ‘considerable time’ to adoption meant about 1,700 years.

It seems that it did not occur to the Ancient Greeks to commercialise the aeolipile. In a society with an abundance of slaves there was little interest in harnessing steam power for practical purposes.

Sometimes the problems with the diffusion of technology relate to building the necessary infrastructure. For example, Michael Faraday created the first electric dynamo (to generate electric power) in 1831. However, it took decades for electricity to be harnessed in industry even in advanced economies. Electric street lighting and domestic supplies also took time to develop.

There are parallels between these examples and today. Conventional battery-driven electrical vehicles (EVs), for instance, depend on a network of recharging points for them to be viable (see p40). Even the best-engineered EVs cannot be used without the necessary infrastructure.

There is also the question of technological standards. It is possible that hydrogen fuel cell technology could win out over battery-driven EVs. But that would demand a completely different infrastructure. In addition, the existence of alternative technologies adds further uncertainty for investors.

“Technological diffusion depends on many factors in addition to the inherent usefulness of the innovation itself”

The question of driverless cars or autonomous vehicles (AVs) is even thornier. It can be said for certain that this technology will take decades to adopt – partly because it was first trialled back in the 1980s. There are numerous technical, legal and moral questions ahead (see report in this issue).

But perhaps the most pressing challenge for Europe is the slow diffusion of the latest technology. Despite all the excitement about IT, only a minority of European firms are doing well in implementing the latest technology. Many more are performing poorly. Naturally, there is always a gap between companies but it seems particularly wide at present. 

At least part of the explanation seems to be the protracted period of ultra-loose monetary policy. The easy availability of cheap credit means that the normal process of ‘creative destruction’ – in which inefficient companies collapse and new ones emerge – has been stymied. Most firms feel little incentive to invest in the latest technology.

Technological diffusion depends on many factors in addition to the inherent usefulness of the innovation itself.

Daniel Ben-Ami, Deputy Editor
daniel.ben-ami@ipe.com

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