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Lecture 15

Lecture 15. The Diffusion of Innovations. What is Diffusion of Innovation?. “Diffusion is as much a process by which new technologies are developed as it is a process by which usage spreads….” -Geroski, p.623. Definition of Diffusion of Innovation.

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Lecture 15

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  1. Lecture 15 The Diffusion of Innovations

  2. What is Diffusion of Innovation? “Diffusion is as much a process by which new technologies are developed as it is a process by which usage spreads….” -Geroski, p.623

  3. Definition of Diffusion of Innovation • “the process by which an innovation is communicatedthrough certain channels over time among the members of a social system” (Rogers 1983)

  4. Four Basic Concepts in Diffusion of Innovation • Innovation • Idea, object, or practice that is perceived as new • Channels of Communication • Means by which info is transmitted to or within the social system • Time • Rate at which the innovation is diffused or the relative speed with which it is adopted • Social System • Individuals, organizations, or agencies that are potential adopters of the innovation

  5. Common Scope of Diffusion Research • (1) Characteristics of an innovation which may influence its adoption • (2) Decision-making process that occurs when individuals consider adopting a new innovation • (3) The characteristics of individuals that make them likely to adopt the innovation • (4) The consequences for individuals and society of adopting the innovation • (5) Communication channels used in the adoption process (efficiency, speed of distribution, etc)

  6. Various Early Diffusion Studies Adapted from Mahajan and Peterson (1985)

  7. Purpose of Diffusion Models • To depict the successive increase in the number of adopters over time. • Permits predictionof the continued development of the diffusion process. • Facilitates a theoretical explanation of the dynamics of the diffusion process.

  8. Who uses this stuff? • Marketers! • Movie studios • Political and Interest groups

  9. Foundations of Research on Diffusion of Innovations • Gabriel Tarde (1903) • Proposed the S-shaped curve • As it turned out, study after study tended to show the exact same S-shaped curve when researchers plot the rate of adoption over time.

  10. Diffusion “S” Curve

  11. Foundations of Research on Diffusion of Innovations • Ryan and Gross (1943) • Categories of Adopters (relative time of adoption) • Innovators • Early adopters • Early/Late Majorities • Laggards

  12. Opinion Leadership • Opinion leaders are key for influence and thus ability to successfully diffuse an innovation. • Opinion leaders are concentrated among the early adopters, not the innovators.

  13. Adopter Categories

  14. Stages of Adoption • Everett Rogers (1995) • Awareness • Interest • Evaluation • Trial • Adoption

  15. Categorizing Adopters and Non-Adopters • Adoption: • accept and use innovation • Nonadoption: • nontrial of an innovation • Discontinuance: • rejection of an innovation after it has previously been adopted

  16. Dvorak/QWERTY/Beta/VHS/Dos/Mac/grrrrr???

  17. N of users Time Epidemic Models • Based on simple examination of “spread” • Simplest version is basic exponential model • Central-source model

  18. N of users Time Epidemic Models (continued) • Modified spread model • Diffusion works through word-of-mouth (i.e., previous users)

  19. Cumulative and Individual Adoption Patterns

  20. Assumptions of Simple Epidemic Models • Homophily • Individuals or groups tend to hang out with others who are similar to them (demographics, attitudes, etc) • N is usually constant • Speed of Diffusion usually constant

  21. Transmission versus Persuasion • The situation gets complicated when we do not equate transmission with persuasion. • Persuasion may be influenced by several factors– e.g., risk, ‘trustworthiness’ of persuader. • As Rogers points out, this complexity is part of the reason that the S-shaped curve is rarely symmetric

  22. Accounting for Adoption Decisions • Probit models • Various characteristics (xi) affects the profitability of adoption a new technology Not Adopt Adopt X*

  23. “Relevant Characteristics” • Probit models depend on specifying relevant characteristics which might influence potential adoption. • Potential Relevant Characteristics (Geroski 2000) • Firm Size as one of the most common– why? • Suppliers • Technological Expectations • Costs • Learning costs • Search Costs • Switching Costs • Opportunity Costs

  24. Another Possibility: Information Cascades (Geroski) • What about the innovations that do not successfully diffuse? • “Information Cascades” involve the process of early inertia, potential adopter investment, and the adoption ‘bandwagon’ • Three phases: • Initial choice • Lock-in • bandwagon Photo: engadget.com

  25. Rethinking ‘Classic’ Diffusion Models • Taking “the” new technology for granted • S-curves may not just be the starting point of an analysis of diffusion, but rather exist as one possible outcome.

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