The Process of an In no vol ion Cycle 139 



The projected market equilibrium areas in table 7.3 were lower 

 than those obtained from the estimates, i.e. the parameter k in ta- 

 ble 7.2. This result should be expected when the individual 

 growers do not perceive the market mechanism and underesti- 

 mate the coming reduction in income. The rates of expansion are 

 also consistently lower in table 7.3. Although the study could not 

 be extended to allow detailed analysis of the industry's approach 

 to equilibrium, the early stages observed suggest a process of con- 

 vergence, perhaps of the cobweb type, together with a shift of the 

 distribution of the growers. 



The illustration shows that, despite its simplifying assumptions, 

 the model is capable of illuminating the economics of the adop- 

 tion process. The process proceeded, according to comparative ad- 

 vantage positions, from the skill-intensive to the labor-intensive 

 producers. Several other innovation diifusion cases in Israel 

 (sheep-raising, cut flowers, and sugarbeet) proceeded in a similar 

 pattern. In many other diffusion cases alternative specifications 

 will be more appropriate than the ones adopted here. The effect of 

 knowledge on productivity need not be Hicks-neutral. 

 Knowledge may be more important with one input than with 

 another, this aspect being crucial in the explanation of the diffu- 

 sion of capital-intensive innovations. Alternatively, in an indus- 

 try with a small number of large firms that maintain secrecy, the 

 adoption of a new idea will depend more on the firm's own invest- 

 ment in research and development than on the industry's experi- 

 ence. The innovation cycle resembles in many aspects the prod- 

 uct cycle in international trade; but for a model to give a full ac- 

 count of the product cycle, it should contain elements of import, 

 export, national income levels, and other similarly relevant vari- 

 ables. The present model can serve, with appropriate modifica- 

 tions, as the basic structure for other variants of the theory. 



