The Impact of Competition on Technology Adoption: An Apples-to-PCs Analysis

We study the effect of market structure on a firm's decision to adopt a new technology in the personal computer industry. This industry is unusual because there exists two horizontally segmented retail markets with different degrees of competition: the IBM compatible (or "PC") platform and the Apple platform. We first document that relative to Apple, producers of PCs have more frequent technology adoption, shorter product cycles, and steeper price declines over the product cycle. We then develop a parsimonious vintage-capital model which matches prices and sales of PC and Apple products. The model predicts that competition is the key driver of the rate at which technology is adopted.