4 Innovation

(Chandrasekaran, Tellis, and James 2020) introduce a model for successive technologies adoption that accounts for:

  • Different rate of technology disengagement
  • Different rate of technology adoption

Diffusion

Bass Model (Bass 1969)

\[ h(t) = p + qF(t) \]

where

  • \(h(t)\) = rate of adoption, given not adopted so far

  • \(F(t)\) = cumulative fraction of adopters

  • p = coefficient of innovation, tendency to adopt independent social contagion

  • q = coefficient of imitation tendency to adopt due to social contagion

  • m = market size


After going public, firms increase their innovation levels (i.e., have more innovation), but those innovation are less risky (i.e., fewer breakthrough). (Wies and Moorman 2015)