Time Paths in the Diffusion of Product Innovations

Abstract

This study attempts to measure and analyse the diffusion of product innovations. Diffusion is defined as the spread in the number of producers engaged in manufacturing a new product. Thus, the term refers to the net entry rate in the market for a new product. We trace the history of diffusion for 46 new products and examine the inter-relations among diffusion, other aspects of technological change, price, output, and certain attributes of the relevant markets. To explain the 46 product histories, we construct a theory of the development of industries for new products. Our theory combines elements of traditional, neoclassical models with what Nelson and Winter (I974) have termed an evolutionary theory. A novel feature is that the historical sequence, or time path, of events is viewed as a critical determinant of the ultimate structure of new product markets. Thus the time path of events determines not only the course traversed in reaching the end result but the ultimate market structure itself. The paper is organised in four sections. In Section I we present our theory. In Section II we construct a series of alternative theories of the development of industries for new products based on approaches to be found in received literature. The evidence from the 46 new product histories is examined in Section III. Finally, a brief summary of principal findings follows in Section IV.