Quantitative Diffusion and Substitution Analysis and their Business Applications

Eggler, A. (1989). Quantitative Diffusion and Substitution Analysis and their Business Applications. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-89-095

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Abstract

Successful innovations expand into a market by either satisfying a new demand for products or services or by replacing existing forms to satisfy demand. The growth of innovations satisfying new product or service demands is referred to as diffusion process, whereas in case existing products or services, etc., are replaced by an innovation we are dealing with substitution phenomena. Empirical investigations have shown, that when the investigation of an innovation and its context has been done properly, most of the diffusion and substitution processes follow S-shaped patterns. The purpose of this paper is to introduce a conceptual framework to distinguish between diffusion and substitution and to find appropriate indicators for the description of these processes. If special conditions hold, the mathematical description of the diffusion and substitution process with S-shaped curves can then be used to describe and eventually to forecast the process. It will be furthermore shown, that this information is useful for decision making in business and actually essential for the development of corporate strategies.

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