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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
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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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Investigator
Innovation
Social System
Rapoport (1978)
Radioisotopes
U.S. Hospitals
Perry and Kraemer
(1978)
Computer Applications
Local Govt
Pitcher et al. (1978)
Collective violence
Countries
Oster (1982)
Basic oxygen furnace
Steel manufacturers
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)
 Innovators
 Early
adopters
 Early/Late Majorities
 Laggards
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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:


Nonadoption:


accept and use innovation
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

N of users
Time
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Epidemic Models (continued)

Modified spread model

Diffusion works through word-of-mouth (i.e., previous users)
N of users
Time
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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
Not Adopt
Adopt
X*
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“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.