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This paper documents the delayed adoption of a major technological innovation: the adoption of the diesel locomotive in the US railĀ­ way industry. Contrary to other instances of major technological innovations, the delay in the adoption of the diesel locomotive was not associated with an initial slump in output. We provide a theoretical model which is consistent with both an increase and a decrease in output following the invention of a new technology. Within this model we identify the key factors that make a slump in output unlikely. Download Paper