TECHNOLOGY ADOPTION RATES IN THE US STEEL INDUSTRY

Otavio Fortini, Milo Information Services Corp., U.S.A.

Published in

JOURNAL OF INTERNATIONAL FINANCE AND ECONOMICS
Volume 19, Issue 1, p5-16, March 2019

ABSTRACT

The adoption of new technology has several consequences ranging from sustaining the firm’’s competitiveness down to the tactical level of targeting marketing efforts to certain promising segments. In here, technology adoption models were surveyed and applied to real data in the search for a model that could describe the US steel industry. After 1974 the Open Hearth, Basic Oxygen Furnace, and the Electric Arc Furnace were the three competing technologies in the US steel industry. The simple logistic fit and the competitive Lotka-Volterra model were considered to describe the data. Model parameters for the logistic fit were obtained by the least squares method and a steepest descent search algorithm. The competitive Lotka-Volterra model was solved using a Runge-Kutta numerical integration after obtaining parameters with a linear regression. Neither of these two models was successful in describing the data. Therefore, a modified Lotka-Volterra model was developed to describe a system dynamics where all players compete for one finite resource. This model was very successful in predicting the production rates of steel by the Basic Oxygen Furnace, the Open Hearth, and the Electric Arc Furnace over the period of available data (1978 through 2017). Besides showing that the steel market dynamics in the US is not akin to the competition in biological systems as proposed by Volterra, the model correctly predicted the extinction of the OH technology in the US in 1991. Forecasts from the resource limited Lotka-Volterra predict that the Basic Oxygen Furnace technology should go extinct in the US in the year 2033, whereas EAF production shall accelerate. “There where there is no struggle against fate there shall you resurrect your soul.” - Aleksandr Solzhenitsyn, The Gulag Archipelago

Keywords

Steel, industry dynamics, model, Lotka-Volterra, technology, adoption


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