LECTURE 15 The Diffusion of Innovations 1. What is Diffusion of Innovation? “Diffusion is as much a process by which new technologies are developed as.

LECTURE 15The Diffusion of The Diffusion of InnovationsInnovations

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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

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Definition of Diffusion of Innovation

“the process by which an innovation is communicated through certain channels over time among the members of a social system” (Rogers 1983)

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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

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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)

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Various Early Diffusion Studies

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InvestigatorInvestigator InnovationInnovation Social SystemSocial System

Rapoport (1978)Rapoport (1978) RadioisotopesRadioisotopes U.S. HospitalsU.S. Hospitals

Perry and Kraemer Perry and Kraemer (1978)(1978)

Computer Computer ApplicationsApplications

Local GovtLocal Govt

Pitcher et al. Pitcher et al. (1978)(1978)

Collective violenceCollective violence CountriesCountries

Oster (1982)Oster (1982) Basic oxygen Basic oxygen furnacefurnace

Steel Steel manufacturersmanufacturers

Adapted from Mahajan and Peterson (1985)

Purpose of Diffusion Models

To depict the successive increase in the number of adopters over time.

Permits prediction of the continued development of the diffusion process.

Facilitates a theoretical explanation of the dynamics of the diffusion process.

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Who uses this stuff?

Marketers!

Movie studios

Political and Interest groups

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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.

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Diffusion “S” Curve

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Foundations of Research on Diffusion of Innovations

Ryan and Gross (1943) Categories of Adopters (relative

time of adoption)InnovatorsEarly adoptersEarly/Late MajoritiesLaggards

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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.

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Adopter Categories

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Stages of Adoption

Everett Rogers (1995) Awareness Interest Evaluation Trial Adoption

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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

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

Epidemic Models

Based on simple examination of “spread” Simplest version is basic exponential model Central-source model

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N of users

Time

Epidemic Models (continued) Modified spread model

Diffusion works through word-of-mouth (i.e., previous users)

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N of users

Time

Cumulative and Individual Adoption Patterns

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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

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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

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Accounting for Adoption Decisions Probit models

Various characteristics (xi) affects the profitability of adoption a new technology

22X*X*

Not Adopt

Adopt

“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

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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

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.