Dual-Channel Technology Diffusion: Spatial Decay and Network Contagion in Supply Chain Networks

Kikuchi, Tatsuru (2025): Dual-Channel Technology Diffusion: Spatial Decay and Network Contagion in Supply Chain Networks.

Abstract

This paper develops a dual-channel framework for analyzing technology diffusion that integrates spatial decay mechanisms from continuous functional analysis with network contagion dynamics from spectral graph theory. Building on \citet{kikuchi2024navier} and \citet{kikuchi2024dynamical}, which establish Navier-Stokes-based approaches to spatial treatment effects and financial network fragility, we demonstrate that technology adoption spreads simultaneously through both geographic proximity and supply chain connections. Using comprehensive data on six technologies adopted by 500 firms over 2010-2023, we document three key findings. First, technology adoption exhibits strong exponential geographic decay with spatial decay rate $\kappa \approx 0.043$ per kilometer, implying a spatial boundary of $d^* \approx 69$ kilometers beyond which spillovers are negligible (R-squared = 0.99). Second, supply chain connections create technology-specific networks whose algebraic connectivity ($\lambda_2$) increases 300-380 percent as adoption spreads, with correlation between $\lambda_2$ and adoption exceeding 0.95 across all technologies. Third, traditional difference-in-differences methods that ignore spatial and network structure exhibit 61 percent bias in estimated treatment effects. An event study around COVID-19 reveals that network fragility increased 24.5 percent post-shock, amplifying treatment effects through supply chain spillovers in a manner analogous to financial contagion documented in \citet{kikuchi2024dynamical}. Our framework provides micro-foundations for technology policy: interventions have spatial reach of 69 kilometers and network amplification factor of 10.8, requiring coordinated geographic and supply chain targeting for optimal effectiveness.

• Item Type: MPRA Paper
• Language: English
• Keywords: Technology diffusion, Supply chain networks, Spatial treatment effects, Network contagion, Navier-Stokes dynamics, Spectral graph theory
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D85 - Network Formation and Analysis: Theory; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships ; Contracts and Reputation ; Networks; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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