a) Diffusion - knowledge sharing

• The restrictive nature of global imitation
• In order to imitate, the firm must learn something about the new technology: there must be minimal communication (formal or informal).
• Firms learn from their neighbors in the social network (not necessarily spatial): localized imitation (tagged individual):

is the set of relevant neighbors of the firm i.

b) Innovation - social dimension: network externalities

• Social use of technology is a source of new knowledge about it, and hence, a source of amelioration: network externalities.
  • NE can be industry wide (global anonymous interactions)

where is the intrinsic productivity of technology and is the number of firms using this technology in the industry

• NE can also enhance technologies of small groups of firms (tagged individual interactions).
  
  

where is the number of neighbors of i using the technology

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