Economic and Technical Drivers of Technology Choice: Browsers Timothy F. Bresnahan and Pai-Ling Yin First Draft: Nov 05, 2003 This Draft: August 12, 2005 Abstract The diffusion of new technologies is their adoption by different economic agents at different times. A classical concern in the diffusion of technologies (Griliches 1957) is the importance of raw technical progress versus economic forces. We examine this classical issue in a modern market, web browsers. Using a new data source, we study the diffusion of new browser versions. In a second analysis, we study the determination of browser brand shares. Both analyses let us examine the important of technical progress vs. economic forces. We find that the critical economic force was browser distribution with a complementary technology, personal computers (PCs). In both of our analyses, distribution had a larger effect on the rate and direction of technical change than technical browser improvements. This shows an important feedback. Widespread use of the Internet spurred rapid expansion of the PC market in the late 1990s. Our results show that the rapid expansion in PCs in turn served to increase the pace of diffusion of new browsers and thus move the economy toward new mass market commercial Internet use. Timothy F. Bresnahan Pai-Ling Yin Landau Professor in Technology and the Economy Harvard Business School Stanford University Morgan Hall 241 Department of Economics Soldiers Field 579 Serra St. Boston MA 02163 Stanford, CA, 94305 USA
[email protected] [email protected] 1) Introduction A new invention creates a technological opportunity. The diffusion of the new technology to the economic agents who will use it determines the rate and direction of realized technical change in the economy.