Diffusion - Stuart Fitz-Gerald

Internet Technologies

The Diffusion of Internet TechnologiesStuart Fitz-Gerald

Technological Diffusion

Introduction• Invention, Innovation and Diffusion• Models of Diffusion• Is the Internet and WWW typical

with regard to diffusion?• Technologies we can consider

Terminology

“When I use a word” Humpty Dumpty said in a rather scornful tone, “it means just what I choose it to mean, neither more nor less.”Lewis Carroll - Alice Through the Looking Glass

Innovation v Invention

Innovation often used loosely to indicate something newly created or produced.

Innovation frequently confused with invention. Inventions are innovations since they are

something new Innovation need not be invention, it may be

something which has found a fresh application.

Technological Diffusion

Why do some ideas spread faster than others? An understanding of this is potentially important

for:o Those who sell goodso Those who market themo Those who produce them

The study of the mechanism of adoption is the study of diffusion.

The Nature of Innovation

Innovation is perceived as something novel whether it is new or not

Things that are perceived as new bring about change

Any change implies risk It can impart competitive advantage

Aspects of Innovation

Cost - the higher the cost the slower the adoption

Complexity- simple ideas are adopted more readily

Visibility- if it can be inspected it is more likely to be adopted

Divisibilty - testing is an important preliminary to adoption

Compatibility- past experience with related ideas influences adoption

Utility- if it offers major improvement it is likely to be adopted quickly

Collective Action - effective group decision making can speed adoption

The Innovative Process

Planned to Occur - planned in the sense of being deliberate eg software or OS upgrades

Improvements - innovations are created to bring about improvement either technological or social eg HTML to XML; introduction of biometric data on ID cards

Fundamental in Nature - completely change the perception of doing business eg WWW, atomic energy

Emergence of Innovations

Research - tends to be more associated with invention than innovation. It may relate to new processes eg object oriented design

Invention - the creation of something completely new eg microchip

Discovery - recognition of something previously unknown eg computer memory

Development - improvement of something which already exists such as an evolving standard

Problem Solving - innovative effort is part of problem solving eg systems development, SSM

Context of Innovation

Entrepreneurship - often the innovator, the one prepared to take the risk

Mobility of Labour - specifically the versatility of attitudes

Effective Communication - people need to be made aware of the innovation

Democratic Structure - authoritarian regimes can limit adoption

Market Orientation - for the innovation to widely adopted it must be readily available

Adopter Categories

Innovators - first to adopt the new idea Early Adopters - early adopters who are a little more

cautious Early Majority - not leaders, but adopt just before the

average member of the social system Late Majority - those who are sceptical about the value

of change Laggards - the last adopters who are very traditional in

their outlook

Diffusion differs from Adoption

Adoption - the result of a personal mental process

Diffusion - a social activity of which interpersonal contact and influence are inescapable. The starting point is still with individual adoption, the process is a form of cumulative adoption.

Dimensions of Diffusion Acceptance - regular use of an innovation Time - elapsed time measures the rate of diffusion Innovation - the concept of adoption and diffusion can only be

applied to one innovation at a time Adopters - most decisions to adopt are made by individual users Communication Channels - the route along which information

passes from sender to receiver Social Structure - the environment in which communication is

made eg the organisation Culture - the degree of freedom permitting the individual to be

different

A Classic Model of Diffusion

The classic article on diffusion is by Zvi Griliches (1957) “Hybrid Corn: An Exploration in the Economics of Technological Change” Econometrica, 48, 1451-62.

The diagram on the next slide illustrates the findings.

A Classic Model of DiffusionGriliches findings:

The Classic Diffusion FunctionThe Classic Diffusion Function

The following is the general logistic representation of the sigmoid growth curve:

With a specific functional form we could write:

The Classic Diffusion FunctionThe Classic Diffusion Function

This last equation can be estimated using regression analysis.

This we could rearrange as follows:

The Classic Diffusion Function

The Classic Diffusion Function

Using the following estimated values:

In:

The Function Visually

Diffusion of Technology

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Time

Adoption Proportion

Adoption

This shows how the new technology is adopted over timeassuming 80% is saturation point.

Example: The Diffusion of Internet Use

The Internet revolution may marginalize those countries that lack education, infrastructure, and government support. What factors may differentiate Internet development in developed and less developed economies? By addressing those factors a country may benefit from the new wave of new Internet technology.They examined the diffusion of Internet use in DCs and LDCs using Internet Host Density as their measure (IHD = IP addresses per 10,000 people). The results are seen in the next diagram using the regression equation below on 20 LDCs and 20 DCs:

Zao et al 2004 posed the following question:

Diffusion of Internet in LDCs and DCs

0

100

200

300

400

500

600

1 2 3 4 5

Year (1995-1999)

Internet Host Density

DCs

LDCs

Empirical Questions

What are the major determinants of Internet diffusion?What explains the differences in Internet diffusion between developed and developing countries?

Related Literature and PointsTechnological Infrastructure

•Internet provides a platform for a global market place, supporting electronic commerce.•Goodman, et al. (1994) show that there are three primary barriers to wider distribution of networking: 1. Government policies, law, and practices; 2. Technical impediments, and 3. Local and cultural factors.•Oxley and Yeung (2001) indicate that the Internet diffusion is directly impacted by network infrastructure. The extent of development within telephone, computer, and communication technologies were found directly correlated with Internet diffusion. •Human capital is directly associated with the innovativeness of a nation. Nedovic-Budic et al. (1996) and Press (1992) found that lack of technical expertise and training programs for both system administration and end users in LDCs is an inhibitor to the Internet diffusion process.

Related Literature and PointsPolicy Regime

• The regulatory regime of a country affects the acceptance and deployment of new technology, such as the Internet. Generally, the government adopting a positive attitude towards Internet technology may engage in restructuring the domestic economy and adaptive policies to encourage diffusion. For example, in some less developed countries (LDCs), governments have played a major role in Internet development through initiating and funding the Internet and internet-related technologies. On the other hand, LDCs can also be impacted by reluctant governments that can actually impede the diffusion. (Zhao, 2002; Berkhart, et al. 1998; Petrazzini and Kibati, 1999).

Related Literature and PointsNational Investment

• The development and deployment of technology is hindered by the lack of a strong private sector and by limited capital, as is seen in most LDCs. Therefore, for the enhancement of Internet development in LDCs, government investment is essential to create incremental improvements in national capacity. Without government support, the national network backbones established in several LDCs would not have materialized. This suggests that LDCs with a higher rate of government expenditure experience a higher speed of Internet development. • The velocity of Internet development may also be enhanced as the efficiency of international capital flows and foreign direct investment increase. (Quelch and Klein, 1996; Petrazzini and Kibati, 1999)

Related Literature and PointsCultural Factors

• Culture differences connote a “broad tendency to prefer certain states of affairs over others”. Cultural factors also influence how people perceive, process and interpret information. To the extent that Internet use and content encounter diverse cultural expectations, human volition also plays a part in Internet diffusion. Cultural traits of countries may affect the growth of Internet hosts if permeation of the Internet is perceived by a culture either as a challenge or as an accompaniment to the mainstream social values. (Hofstede, 1980 and 2001; Kale, 1991; Fock, 2000; Schwartz, 1994; Chui, et al., 2002)

Observations and Propositions

These comments match well with the observations associated with adoption and diffusion noted earlierAn interesting question is how true these obervations are for other specific Internet Technologies we have consideredThese include:

o XMLo Javao Web serviceso Wikiso Security

Diffusion of Internet Technologies is no different to other technologies What other models are relevant? We will consider those next week.