The adoption of technological innovations: dynamic and cumulative effects in telecommunications networks

This paper studies the effects of the adoption of technological innovations on the efficiency of telecommunications (TLC) carriers. Firstly, since uncertainty and extra costs are likely to characterize the early phases of adoption, dynamic performances can be strikingly different from the steady state ones. Secondly, differences among carriers in technological history do matter; firms who cumulated a greater deal of specific innovations will be better at using the new technology. A cost model is formulated. The adoption of digital switching equipment is observed and a sample has been gathered for twelve european countries, over the period 1980-‘89. As far as empirical findings are concerned, innovative carriers expose themselves to a transient cost increase, to be cumulated with any subsequent efficiency gain; a cost cycle is determined by the adoption of new equipment; cumulativeness is at work.