Association for Public Policy Analysis & Management

The theories of punctuated equilibrium and diffusion are widely studied across a variety of disciplines, such as economics, policy, marketing, and history, and often studied congruently. The main focus of punctuated equilibrium and diffusion research is between two competing technologies, one incumbent and one new, and their penetration and adoption in a specific market. Less focused upon, however, are punctuations and diffusions of a single technology across industries.

Here, we adapt the model described in 1999 by Loch and Huberman. This model studies technology diffusion and punctuation of a new technology when it is competing with an established technology. As innovation naturally cycles through industries, short and sudden punctuations, often referred to as “radical change,” can occur, signifying a major shift from an old technology to the new technology. Punctuations are more likely to occur if there are positive externalities associated with the technology, thereby making the adoption beneficial to the user. Initial uncertainties associated with adopting the technology also increase the likelihood of adoption, as do high learning-rates and the speed at which users adopt the technology.

Though the Loch and Huberman model is clearly designed, the model has only applied to competing technologies in the same industry. We propose that the diffusion and punctuation patterns described and documented using the Loch and Huberman model will be evident when applied to a single technology’s market penetration across at least two industries. This will allow for insight and a new way to view cross-industry technology transfer. To conduct this analysis, we use the hydraulic fracturing technology as a case study. Hydraulic fracturing has been used in the oil and gas industry since the mid-1940s and, combined with horizontal drilling, has been credited with the recent boom in natural gas production from shale rock. It has also been suggested that hydraulic fracturing technology be utilized in Enhanced Geothermal Systems (EGS) drilling. Our final model uses the fracturing technology to analyze market penetration between the oil and gas industry and the EGS industry.