The Economics of Technology
Unique ID: 52800
Time: TTh 12:30-2:00
Location: GEO 2.202
Office Hours: TTh 5:00-6:00 in our respective offices
The class syllabus is online here.
Class email list:
Anyone in the class can post to the list. All students,
instructors, and auditors are on the list. Students are
encouraged to use the list for class-related discussions.
The mid term paper should be around 10 pages (single spaced, 12 pt).
If it's shorter than 5 pages or longer than 20 pages, something is
The topic is of your choosing; one possibility would
be to answer one of the daily reading questions in more depth.
We expect that you will find and cite a few additional additional
references to support your arguments.
Due date Oct 30.
The final paper is an original, in-depth paper due on the last day
of class. It is expected to include a carefully thought-out thesis
or analysis with substantial supporting arguments, evidence, and background
research/citations. You may choose the topic, subject to approval by
the instructors. One possibility is to analyze why a particular
topic or technology succeeded or failed in the marketplace, but
we expect more than just an obvious repetition of the historical record.
Some additional readings related to the class are here; they might be useful for final papers.
Now that the class is over, here are some of the final papers:
Structure and Evolution of Technology and Systems -- Macro
- Class 1 (Aug 28) - no readings
- Class 2 (Sept 2) - Disruptive technologies
- Christensen, Clayton M., Disruptive Technologies: Catching the Wave
Question: How important are disruptive technology issues in the build-or-buy decisions of established companies considering acquisitions of startups?
- Christensen, Clayton M., Chapter 3 "Disruptive Technological Change in the Mechanical Excavator Industry" from The Innovator's Dilemma: When New Technologies Cause Great Companies to Fail
Question: How is the PC-to-PDA transition similar to and/or different from the stream-to-hydraulic excavator transition?
- Please email us (email@example.com, firstname.lastname@example.org) a copy of this outline with your preferences indicated for each lowest level bullet. Use numerical preferences, smallest being most preferred (e.g. you'd rather cover something with preference level 1 than with preference level 2)
- Class 3 (Sept 4) - Network effects
- David, Paul A., Clio and the Economics of QWERTY
Question: Compare QWERTY's effects as a standard to a
particular standard in the computer industry? Does it have
similar benefits and drawbacks, or is it different because it
is primarily an "end user" standard?
- Shapiro, Carl and Varian, Hal R., The Art of Standards Wars
Question: Discuss the 64bit CPU standards
war, Itanium vs. AMD-64 vs the IBM Power architecture using this
paper's classification scheme.
- Class 4 (Sept 9) - Schumpeterian Competition: Monopolies and competition in complimentary markets
(renamed from: Competition in Operating Systems),
scribed by Jason Chaw.
- Samuelson, Robert J. "The Gates of Power", The New Republic, April 23, 2001, pp. 28-33.
Question (pick 'A' or 'B'): (A) Two years later, are we starting to see answers to some the questions that Samuelson asks? In particular, what has happened now that some parts of Microsoft's business are past the rapid growth phase? (B) Are operating systems a natural monopoly? Is this the main reason for Microsoft's success?
- Bresnahan, Timothy F., The Microsoft Case; Competition, Innovation, and Monopoly
Question: Discuss the pros and cons of various remedies proposed for Microsoft's monopolistic practices in terms of their likely effects on the industry. Make a recommendation.
- OPTIONAL: Vinod V. with comments by Eric S. Raymond, "Halloween I whitepaper",
- Class 5 (Sept 11) - Open source as a competitive force
- Fear of Forking Essay, Rick Moen, Nov. 1999 with later corrections and annotations.
Question: Suppose that Linux and a rich open source software suite (including dosemu) were fully developed a couple of years after the introduction of the i386 in 1985. What impact, if any, would that have had on the development of PC technology?
- Open-Source vs. Proprietary Software, Jean-Michel Dalle
Question: Suppose your goal is to derive a proprietary advantage from a product based on open source technology. How would you go about doing so?
- OPTIONAL: The Simple Economics of Open Source, Josh Lerner and Jean Tirole.
- Class 6 (Sept 16) - Geographic clustering of companies,
scribed by Peter Magic.
- Porter, Michael A., Clusters and the New Economics of Competition Question: Many fundamental cluster effects seem to be rooted in interpersonal relationships and a common employment pool in a local area. These also drive up the costs of doing business in a cluster area and promote exporting clusters. How do you see the advent of the Internet, telecommuting, cellphones, and other changes in communication and workplace structure affecting the relative strengths of positive and negative cluster effects? Will clusters be more, less, or equally important in the future as a result?
- What's missing in Austin? R & D, Gary Chapman, Austin American-Statesman, Jan 11, 2001.
- How Silicon Valley Won, Boston Globe, March 13, 1994. Summarizes book "Regional Advantage: Culture and Competition in Silicon Valley and Route 128", by AnnaLee Saxenian. Question: Porter's explanation of cluster effects in the paper above was pretty generic, and as such doesn't really distinguish very well between characteristics of clusters in the same business such as those of Silicon Valley and Route 128. How would you modify or extend Porter's explanation to account for the arguments in this article?"
- Excerpt from "The Silicon Valley edge: a habitat for innovation and entrepreneurship, Lee et al. [This reading is CANCELLED, because we don't have it.]
- Class 7 (Sept 18) - Development of Technology Markets,
scribed by Josh Wills.
- Crossing the Chasm -- and Beyond, Chapter 2 from "Inside the Tornado", by Geoffrey A. Moore.
Question: What stage of the technology adoption cycle is videoconferencing
technology currently in? What would be the best strategy for a company
selling videoconferencing equipment to use to drive the technology and
marketplace to the next stage of the cycle?
- How Market Leaders Keep Their Edge, Treacy, Michael and Wiersema, Fred, Fortune, Feb 6, 1995.
Question: Is Treacy's analysis appropriate for technology
companies? Why or why not?
- Class 8 (Sept 23) - Technology's Impact on Productivity Growth,
scribed by Subramanyam Mallela.
- Wal-Mart case study, excerpt from HBS case study [includes description of how technology is used].
- Computer Use and Productivity Growth in Federal Government, 1987 to 1992, Lehr, William and Lichtenberg, Frank, NBER Working Paper 5616
- US Productivity Growth, 1995-2000, Executive Summary, McKinsey Global Institute Report, October 2001.
Question: What are the three most important business-process changes
that Wal-Mart made to be able to realize produtvity benefits from
technology? [Or, as usual, you can write one page of anything that
clearly demonstrates you read the assigned readings and have thought
Patents and Intellectual Property
- Class 9 (Sept 25) - Introduction to Patents and Intellectual Property, scribed by Josh Wills
- Patent Basics for Physicists, Richardson and Wood, Physics Today, April 1997
- Excerpt (pp. 1/8 to 1/24) from Patent it Yourself, Pressman, August 1996. [This excerpt describes the distinctions between patents, copyrights, trademarks and trade secrets].
- Restoring the lost art of patent strategy, chapter 2 from Rembrandts in the Attic: Unlocking the Hidden Value of Patents, Rivette and Kline, 2000.
Question: Analyze a recent patent case using the framework presented by Rivette and Kline. For example: Is it wise for SCO to try to make money by suing IBM?
- Class 10 (Sept 30) - ...
- Mips vs. Lexra: Definitely not Aligned, Halfhill and Belgard, Microprocessor Report, Dec. 1999.
The outcome of this dispute is described here and here
- Surviving the Internet Patent Wars Rembrandts in the Attic, Chapter 7
Question 1: Is there (or will there be) an Internet Patent War?
Question 2: Will patent strategy help or hinder the continued growth of Open Source software? What should the Open Source community do about patents?
Structure and Evolution of Technology and Systems -- Micro
- Class 11 (Oct 2) - Value Capture,
scribed by Subramanyam Mallela
- Class 12 (Oct 9) - Investment, V.C.s, Startup Infrastructure
- Class 13 (Oct 14) - Startups, Entrepreneurship I,
scribed by Josh Wills.
- Hamm, John
"Why Entrepreneurs Don't Scale", Harvard Business Review,
Dec 2002, vol. 80, no. 12, pp. 110-116
- Additional readings:
- Roberts, E.B. "Technological Entrepreneurship: Birth, Growth, and
Success", Chapter 12, Entrepreneurs in High Technology: Lessons
from MIT and Beyond, Oxford University Press, 1994, pp. 339-357.
- Class 14 (Oct 16) - Startups, Entrepreneurship II,
scribed by Rob Landley.
- Class 15 (Oct 21) - Startups, Entrepreneurship III
- Chapter 3 (pp. 34-58), "The Business Plan: A Roadmap and a Scorecard for the Future", from Gordon Bell and John McNamara, "High Tech Ventures: The Guide for Entrepreneurial Success"
- Chapter 4 (pp. 59-84), "Cash, Financeability, and Control", from same book (Bell and McNamara)
- "Angels and Informal Risk Capital", William H. Wetzel, Sloan Management Review 24, no. 4 (Summer 1983), pp. 23-34.
- Class 16 (Oct 23) - Guest lecture - Peter Salus on SCO vs IBM,
scribed by Peter Magic
- Class 17 (Oct 28) - Value Capture and Innovation Strategy I,
scribed by Peter Magic.
How much of the value created by new technologies can be captured by the organizations that create them?
How should companies manage their research to benefit their business?
- Introduction (pp. xvii-xxxi) from "Open Innovation: The New Imperative for Creating and Profiting from Technology", Henry Chesbrough, HBS Press, 2003.
- "How Rapidly Does New Industrial Technology Leak Out?", Mansfield, Edwin, Journal of Industrial Economics, vol. 34, no. 2 (Dec. 1985), pp. 217-223.
Question: Both of these readings argue that most innovations
unavoidably diffuse outside the organization that developed them,
but that this diffusion takes time. How should a company that
wants to capture maximum value from its internally funded research
take advantage of this delay? How can universities and other
organizations that do not productize their own innovations
take advantage of this delay to capture value from their
- Class 18 (Oct 30) - Value Capture and Innovation Strategy II
- Chapter 1 ("Xerox PARC: The Achievements and Limits of Closed Innovation", pp. 1-19) from "Open Innovation: The New Imperative for Creating and Profiting from Technology", Henry Chesbrough, HBS Press, 2003.
- Schwartz, Evan Who Really Invented Television?, Technology Review,
- "Strategy and the Internet", Porter, Michael, Harvard Business Review, March 1, 2001.
Question: For a particular company, the primary value-capture question is "how much value can my company capture"? But for society as a whole,
the primary value-capture question may be "how much benefit (value capture!)
does the typical member of society receive?" Can you propose a mechanism
for balancing value capture by innovators and by customers that would
(theoretically) maximize benefit to the median member of the public?
- Class 19 (Nov 4) - Value Capture and Innovation Strategy III
- Chapter 5 ("From Closed to Open Innovation: The Transformation of the IBM Corporation", pp. 93-112) from "Open Innovation: The New Imperative for Creating and Profiting from Technology", Henry Chesbrough, HBS Press, 2003.
- Chapter 6 ("Open Innovation @ Intel", pp. 113-133) from the same book (Open Innovation...).
Question: How might Intel adapt or augment its research funding
strategy to address the concerns raised in the last two pages of Chapter 6?
- Class 20 (Nov 6) - Vertical integration and dis-integration
Note: This is really a macro issue as much as a micro one, so
we could have discussed it in an earlier part of the course.
- Chapter 5
("Getting the scope of the business right") from The Innovator's
Solution: Creating and Sustaining Successful Growth,
Christensen and Raynor, 2003.
- Chapter 6
("How to avoid commoditization") from the same book.
Technology Management Strategy
- Class 21 (Nov 11) - Quantitative measures of performance
- Who's on First, Richard H. Thaler and Cass R. Sunstein, The New Republic, Sept 1, 2003, pp. 27-31. (Review of "Moneyball: The Art of Winning an Unfair Game")
- Has pay for performance had its day?, J. Day et al, McKinsey Quarterly, 2002 Issue 4.
Question: Research institutions (e.g. universities) have
difficulty quantifying the productivity of their workers (e.g.
faculty). How do they attempt to do so? What do today's readings
say about the best approach for doing so? Do these same questions
apply to research personnel in a company?
Technology and Society
- Class 22 (Nov 13) - Government Support of Research
"The Simple Economics of Basic Scientific Research", R. Nelson,
Journal of Political Economy, vol. 67, no. 3 pp. 297-306.
"Academic Research and Industrial Innovation", Edwin Mansfield,
Research Policy, vol. 20 (1991), pp. 1-12.
"High-tech R&D Subsidies: Estimating the Effects of Sematech",
Douglas Irwin, Peter Klenow, Journal of International Economics,
vol. 40 (1966), 323-344.
- Question: How would you formulate a national research policy
for the 21st century that optimizes the economic benefits per research dollar?
Consider the strengths and weaknesses of the three research vehicles we've
examined: industry labs, academia, and research consortia like Sematech.
Which should be encouraged and funded to do what? Do we need them all? Do
we need different models?
- Class 23 (Nov 18) - "Peopleware"
- Class 24 (Nov 20) - Managing for creativity
Managing Creative Professionals, by Albert Shapero, in
The Human Side of Managing Technological Innovation:
A Collection of Readings, Ralph Katz, 1997.
Creativity Under the Gun, Amabile, Hadley, and Kramer,
Harvard Business Review, August 2002.
- Excerpt from
Wierd Ideas that Work: 11 1/2 Practices for Promoting, Managing,
and Sustaining Innovation, Robert Sutton, pp 16-17.
- Class 25 (Nov 25) - Technology and regulation in cyberspace
Code is Law: On Liberty in Cyberspace, by Lawrence Lessig, in
Harvard Magazine, January-February 2000
Chapter 4: Architectures of Control
from Code and Other Laws of Cyberspace
by Lawrence Lessig, Basic Books, 1999.
Chapter 6: Cyberspaces
from Code and Other Laws of Cyberspace
by Lawrence Lessig, Basic Books, 1999.
- Question: What forces are most likely to shape the Internet
for the next decade? Government? Private industry? The open-source movement?
How will things change?
- Class 26 (Dec 2) - A venture capitalist's view of technology startups,
- Guest lecture by Stephen Straus, Venture Partner, Austin Ventures
- Class 27 (Dec 4) - Technological change as a subversive force
(c) 2003 Don Fussell and Bill Mark