Organizational boundaries and the diffusion of technological innovations: An empirical study of microprocessors in the personal computer industry

Drawing on the transaction-cost theory of economics, a theortical model is developed to explain how organizational boundaries influence the decision to adopt a technological innovation over time. Organizational boundaries are defined both vertically and horizontally in terms of vertical integration and breadth of diversification. Specific hypothesis posit the mechanisms by which organizational boundaries influence the timing of innovation adoption. These include internal resource allocation, commitment to specific technologies, transaction costs, and interstage coordination. The empirical analysis uses data on the diffusion of new microprocessors across all manufacturing firms in the personal computer industry. The findings suggest that (1) organizational boundaries do affect the timing of adoption, but their effects differ across different generations of microprocessors; (2) other organizational variables, such as size and age, remain significant factors after the boundary variables have been controlled, but their effects cannot be reliably assessed unless the life-cycle stage of the microprocessor technology is taken into account; (3) some interactions between the boundary variables and size or age help provide a more complete explanation of the innovation-adoption behavior of personal computer firms; and (4) the CEO's background and tenure may play crucial roles in affecting the propensity to adopt innovations in the personal computer industry, although their effect deviates from what has been predicted by common wisdom.