Abstract

Why is the speed of technology adoption di¤erent across countries? Equity markets have an important role in facilitating ownership transfers from entrepreneurs, who invest in the initial stage of technology adoption, to managers who run these …rms after technology is adopted. This paper argues that technology adoption decisions of the entrepreneurs are a¤ected by their expectations of the market value of their …rms. When market participants have imperfect information, two opposite forces emerge. First, uncertain and low expected market value discourages the entrepreneur from adopting the most recent technology. Second, by investing in the newest technology, an entrepreneur can send a positive signal about the pro…tability of his …rm, and thus increase its market value. When the number of informed investors is low, the …rst force dominates and technology is adopted slowly. Fast technology adoption is most likely at an intermediate number of informed investors, where the expected gains from sending a positive signal to uninformed investors are the highest. The link between the speed of technology adoption and policies that facilitate access to information is analyzed when extending the basic model to allow for an endogenous number of informed investors.

Citations