Abstract

"Technological Stickiness: Switching and Entry in the Long Transition from Water to Steam Power"

Martin Rotemberg, New York University (mrotemberg@gmail.com)

We examine the long transition from water to steam power in US manufacturing, exploring how early advantages can delay the adoption of new technologies. To do this, we digitized the entire surviving records of the Census of Manufactures manuscripts for 1850-1880, which contain a wealth of information on inputs, outputs, and technology use. In order to create a panel, we hand-linked establishments using their names. For identification, we leverage variation in US counties’ waterpower potential, due to interacting water flow and elevation changes, and focus on flour and lumber mills, which were the primary users of waterpower. We show that as steam costs declined, mill activity grew faster in counties with less potential for waterpower. This growth was driven by steam-powered entrants, as previously-waterpowered mills exited instead of switching technologies, suggesting technological lock-in. We find evidence of agglomeration, as mills influenced their neighbors to also adopt steam power. To quantify the delay in steam adoption from technological lock-in, we estimate a dynamic model of firm entry and steam adoption.