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A Percolation Model of the Product Lifecycle

Author

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  • Koen Frenken
  • Gerald Silverberg
  • Marco Valente

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.

Suggested Citation

  • Koen Frenken & Gerald Silverberg & Marco Valente, 2008. "A Percolation Model of the Product Lifecycle," DRUID Working Papers 08-20, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    • Handle: RePEc:aal:abbswp:08-20
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    References listed on IDEAS

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    12. Simona Cantono & Gerald Silverberg, 2008. "A percolation model of eco-innovation diffusion: the relationship between diffusion, learning economies and subsidies," MERIT Working Papers 2008-025, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
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    Cited by:

    1. 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.
    2. D’Orazio, Paola & Valente, Marco, 2019. "The role of finance in environmental innovation diffusion: An evolutionary modeling approach," Journal of Economic Behavior & Organization, Elsevier, vol. 162(C), pages 417-439.
    3. 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 201205, University of Turin.
    4. Vona, Francesco & Patriarca, Fabrizio, 2011. "Income inequality and the development of environmental technologies," Ecological Economics, Elsevier, vol. 70(11), pages 2201-2213, September.
    5. Paolo Zeppini & Koen Frenken & Luis R. Izquierdo, 2013. "Innovation diffusion in networks: the microeconomics of percolation," Working Papers 13-02, Eindhoven Center for Innovation Studies, revised Feb 2013.
    6. Torsten Heinrich, 2018. "Network Externalities and Compatibility Among Standards: A Replicator Dynamics and Simulation Analysis," Computational Economics, Springer;Society for Computational Economics, vol. 52(3), pages 809-837, October.
    7. 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;Society for Economic Science with Heterogeneous Interacting Agents, vol. 7(2), pages 145-165, October.
    8. Paola D’Orazio & Marco Valente, 2018. "Do Financial Constraints Hamper Environmental Innovation Diffusion? An Agent-Based Approach," SPRU Working Paper Series 2018-10, SPRU - Science Policy Research Unit, University of Sussex Business School.
    9. Albert Faber & Koen Frenken, 2008. "Models in evolutionary economics and environmental policy: Towards an evolutionary environmental economics," Innovation Studies Utrecht (ISU) working paper series 08-15, Utrecht University, Department of Innovation Studies, revised Apr 2008.
    10. Jan Ter Wengel & Gilma Beatriz Ferreira-Villegas & Gérman Pérez-Hernández & Luis Miguel Suárez-Cruz, 2010. "Schumpeter and the Blue Ocean Strategy," Revista de la Maestría de Derecho Económico, Universidad Javeriana - Derecho Económico, December.

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    More about this item

    Keywords

    Percolation; diffusion; social networks; product lifecycle; dominant design;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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