The Handbook of Technology and Innovation Management

2.2. Diffusion of Innovation/Market Growth

A conceptual framework that captures the factors influencing the diffusion of new products is shown in Figure 2.2. Four major groups of factors affect both the first and repeat purchases of a new product by customers. These factors are: adopter characteristics, innovation characteristics, firm characteristics, and environment characteristics. The adopter characteristics that affect the purchase of a new product include adopter class, risk disposition, geodemographics, economic value need, and word of mouth behavior. The innovation characteristics include relative advantage, relative cost price, perceived usefulness, ease of use, and network externality. The firm characteristics comprise firm size, firm marketing efforts, and firm reputation. The environment characteristics that drive new product trials and repeat purchases include infrastructure, availability and demand for related products, and market conditions. In addition, first purchases influence repeat purchases, sales revenues, and profits of a new product and firm value (e.g., Sorescu, Chandy, and Prabhu, 2003). Toward the end of the life cycle of an innovation, replacement product or technology takes over. The adoption of the replacement product is driven by the same set of factors that determine the original product's purchases.

Five classes of adopters comprise a population: innovators, early adopters, early majority, late majority, and laggards (Rogers, 2003). Adopters differ ...