Technology Diffusion and Market Structure: Evidence from Infertility Treatment Markets

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Abstract
We study how market structure influenced the diffusion of new treatment technology (ICSI) among U.S. fertility clinics that performed in vitro fertilization (IVF). We find that competitive (i.e., non-monopoly) markets were more likely to have a clinic that offered ICSI than monopoly markets. Our results account for the potential endogeneity of market structure with respect to entry-foreclosing technology adoption and unobserved market characteristics that might increase the return from offering ICSI. We also provide evidence that ICSI diffused faster to competitive markets because the returns from the new technology were greater there. Early-adopting clinics in competitive markets experienced a significant increase in size, while early-adopting monopoly clinics did not. However, monopoly clinics that adopted ICSI soon after its invention were more likely to delay the entry of rival firms than monopolists that adopted ICSI later.

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