Diffusion of technology

Question 1

Name four types of theories traditionally set forth to explain the S-shaped nature of diffusion processes.

Answer 1

Epidemic: information about the existence of a new technology spread trough individuals, for which reason new people adopt the technology.
Expected profitability of the innovation: at firm level, where is a spread of information about the characteristics
-Communication-based model: communication is a process, in which participants create information and share them to reach a mutual understanding -> diffusion is a social process that involves interpersonal communication relationship (stronger than mass media) -Network-consumption externality: value of the network for the participants increase with the number of adopters of the system

Question 2

Who are actors involved in the process of diffusion of a technology?

Answer 2

Adopters: can be divided into early adopters, early majority, late majority and laggards depending on the time of adoption (normal distribution)

Question 3

What influences the dynamics of adoption of an innovation from a sociologist’s perspective?

Answer 3

• Relative advantage: subjective perception (e.g. increased comfort, social prestige, saved time and effort)
• Compatibility: consistency with social norms, past experience and needs
• Complexity: degree of how difficult an innovation is to use and understand in a subjective perception
• Trialability: possibility for experimentation on a limited basis
• Observability: degree to which results of an innovation are visible for others

Question 4

What is the meaning of and distinction between stock, order, rank and epidemic effects of diffusion?

Answer 4

• Stock effect: oBenefit to the adopter from acquisition decreases as the number of previous adopters increases oAcquisition costs fall over time -> adoption more profitable at any given time Firms acquire new technology -> production costs fall -> affect industry price -> affect profitability of further adoption
• Order effect: High order adopters achieve greater return. It is profitable to adopt an innovation until a certain adoption time (adoption costs go down over time) -Rank effect: Potential adopters can be ranked to their returns to adoption (builds a function of firms’ characteristics) -Epidemic effect: oInformation, technologies and innovations spreads (no active search) oThe higher the number of adopters, the greater the probability that a potential adopter adopt the new technology

Question 5

What is the “takeoff” time of an innovation?

Answer 5

The time in the life-cycle of an innovation when it transitions from the introduction stage to the growth stage. Change from a desirable product to a popular product and the point, where the change in the derivate of the proportion of adopters reaches a maximum