Pervasive technologies and industrial linkages: Modeling acquired purposes

Abstract

What makes an industry a dominant filiére and a particular technology a so-called general purpose technology (GPT)? The paper contributes to a microeconomics of vertically related and networked industries by framing GPTs as a peculiar case of technological connectivity between sectors and provides a simple model that accounts for the endogenous success (failure) of GPT-based industries in a competing technologies setting. In a nutshell, we explore the process potentially leading to technological pervasiveness and dissect it in its structural elements. The model takes into consideration several conditions under which an upstream technology increases its pervasiveness in the economy or remains constrained as a component used by a small subset of downstream applications only. Hence, the model shows how ‘purposes’ are acquired by a technology struggling to dominate the downstream market. Policy implications of the analysis are highlighted, and dynamic implications of the model are discussed. Two main features of the study are that (i) we go beyond the a priori assumption that a pervasive GPT-like technology already exists in the economy and (ii) we bring GPT theorizing under the umbrella of studies of structural change through the dynamics of industries’ linkages.