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A percolation model of the product lifecycle

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  • Frenken, Koen

    ()
    (Urban & Regional research centre Utrecht (URU), Utrecht University)

  • Silverberg, Gerald

    ()
    (UNU-MERIT, and IIASA)

  • Valente, Marco

    ()
    (Department of Economics, University of L'Aquila)

Abstract

The product lifecycle model can be understood as a three-stage model of technological development associated with a particular product technology. In the explorative stage many different designs are developed, in the development stage products become standardized into a dominant design, and in the mature stage only incremental changes occur within the dominant design. Although the product lifecycle model is widely accepted and often applied in empirical research, innovation scholars have failed to develop systematic theoretical models that explain the different stages of technological development along the lifecycle. In this study, an attempt is made to contribute to product lifecycle theory by developing a theoretical model based on percolation dynamics. The model combines the concept of increasing returns to adoption with information diffusion among consumers within social networks. The main contribution of the model is that it replicates the three stages of the product lifecycle as an outcome of a single elementary process. The model also replicates the S-shaped diffusion curve and the occurrence of an industry shakeout.

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Bibliographic Info

Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 073.

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Date of creation: 2008
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Handle: RePEc:unm:unumer:2008073

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Keywords: mathematical models; percolation model; diffusion; social networks; product lifecycle; dominant design;

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References

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  1. Nelson, Richard R. & Winter, Sidney G., 1977. "In search of useful theory of innovation," Research Policy, Elsevier, Elsevier, vol. 6(1), pages 36-76, January.
  2. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 562-83, June.
  3. Dosi, Giovanni, 1993. "Technological paradigms and technological trajectories : A suggested interpretation of the determinants and directions of technical change," Research Policy, Elsevier, Elsevier, vol. 22(2), pages 102-103, April.
  4. Malerba, Franco & Orsenigo, Luigi, 1996. "Schumpeterian patterns of innovation are technology-specific," Research Policy, Elsevier, Elsevier, vol. 25(3), pages 451-478, May.
  5. Jovanovic, B. & MacDonald, G.M., 1992. "The Life-Cycle of Competitive Industry," Papers, Rochester, Business - Financial Research and Policy Studies 92-09, Rochester, Business - Financial Research and Policy Studies.
  6. Sahal, Devendra, 1985. "Technological guideposts and innovation avenues," Research Policy, Elsevier, Elsevier, vol. 14(2), pages 61-82, April.
  7. Breschi, Stefano & Malerba, Franco & Orsenigo, Luigi, 2000. "Technological Regimes and Schumpeterian Patterns of Innovation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(463), pages 388-410, April.
  8. Marco Valente, 1998. "Laboratory for Simulation Development," DRUID Working Papers, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies 98-5, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  9. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 92(367), pages 630-53, September.
  10. Klepper, Steven, 1997. "Industry Life Cycles," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 145-81.
  11. Simona Cantono & Gerald Silverberg, 2008. "A percolation model of eco-innovation diffusion: the relationship between diffusion, learning economies and subsidies," MERIT Working Papers, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) 025, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
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Cited by:
  1. Vona, Francesco & Patriarca, Fabrizio, 2011. "Income inequality and the development of environmental technologies," Ecological Economics, Elsevier, Elsevier, vol. 70(11), pages 2201-2213, September.
  2. Albert Faber & Koen Frenken, 2008. "Models in evolutionary economics and environmental policy: Towards an evolutionary environmental economics," Innovation Studies Utrecht (ISU) working paper series, Utrecht University, Department of Innovation Studies 08-15, Utrecht University, Department of Innovation Studies, revised Apr 2008.
  3. Giovanni Pegoretti & Francesco Rentocchini & Giuseppe Vittucci Marzetti, 2012. "An agent-based model of innovation diffusion: network structure and coexistence under different information regimes," Journal of Economic Interaction and Coordination, Springer, Springer, vol. 7(2), pages 145-165, October.
  4. Cantono Simona, 2012. "A percolation model of multi-technology diffusion: information feedbacks, learning economies and subsidy policy," Department of Economics and Statistics Cognetti de Martiis. Working Papers, University of Turin 201205, University of Turin.
  5. Paolo Zeppini & Koen Frenken & Luis R. Izquierdo, 2013. "Innovation diffusion in networks: the microeconomics of percolation," Working Papers, Eindhoven Center for Innovation Studies 13-02, Eindhoven Center for Innovation Studies, revised Feb 2013.
  6. Cantono, Simona, 2012. "Unveiling diffusion dynamics: an autocatalytic percolation model of environmental innovation diffusion and the optimal dynamic path of adoption subsidies," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201222, University of Turin.
  7. Jan Ter Wengel & Gilma Beatriz Ferreira-Villegas & Gérman Pérez-Hernández & Luis Miguel Suárez-Cruz, 2010. "Schumpeter and the Blue Ocean Strategy," REVISTA DE LA MAESTRIA DE DERECHO ECONÓMICO, UNIVERSIDAD JAVERIANA - DERECHO ECONOMICO, UNIVERSIDAD JAVERIANA - DERECHO ECONOMICO.

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