This paper examines the economic impact of re-invention — the degree to which an innovation
is modified by user — on industry growth and productivity. The paper focuses on two
re-inventions made by a Japanese steel company; these inventions improved the productive efficiency
of Austrian-made refining technology, namely, basic oxygen furnace (BOF). Results obtained
from the plant-level production-function estimation indicate that re-inventions account for
approximately 30 percent of the total factor productivity of the BOF, substantially promoting the
dissemination of the BOF technology. Our simulation analysis indeed reveals that re-inventions
contributed to steel output growth by about 14 percent. This paper also documents that innovating
companies played the role of a "lead user" in developing and disseminating their re-invented
technologies.
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