# 4 Innovation

introduce a model for successive technologies adoption that accounts for:

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

Diffusion

Bass Model

$h(t) = p + qF(t)$

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).