Spatial Diffusion of Japanese Electric Power Companies, 1887–1906: A Discrete Choice Modeling

Abstract

In adopting an innovation, an individual or firm usually makes successive decisions about adoption, adoption timing, and innovation alternatives. Innovation diffusion is produced from such sequential decision making. Using the nested logit model, I confirm the sequential decision making embedded in the process of diffusion of electric power companies in Japan from 1887–1906. These companies spread overwhelmingly in a hierarchical fashion, and the diffusion was dependent in large part on city size and mode of power generation. I hypothesize a decision tree whose upper nest is concerned with choosing opening time and whose lower nest is concerned with choosing the power-generation mode. The model reveals that accessibility to water resources accounted for the choice of mode and that the maximized utility in this choice, as well as population, explained the choice of opening time. Thus the diffusion resulted from the two-step decision on opening time and the power-generation mode.

Key Words:

• spatial diffusion
• innovation
• nested logit model
• sequential recursive choice
• electricity industry
• Japan