The Diffusion of Innovation among Steel Firms: The Basic Oxygen Furnace

Abstract

The major innovation in the steel industry in the post-World War II period has been the replacement of the open hearth furnace by the basic oxygen furnace. This article examines the diffusion of this important innovation at a more micro level than previous studies by focusing on plant behavior. Wide differences in the characteristics of the plants owned by a particular firm make this focus more appropriate. Using data from several large firms in the industry, estimates are first provided of the productivity of the basic oxygen furnace. Then, differences among plants and firms in the rate of adoption of the basic oxygen furnace are given and the causes of these differences are explored. The major finding of this article is that differences among firms in the rate of adoption of the basic oxygen furnaces are attributable both to the characteristics of the adopting plants that determine the profitability of this innovation and to the size of the firm.

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