A percolation model of the product lifecycle

Koen Frenken, Gerald Silverberg & Marco Valente

#2008-073

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.

Keywords: Percolation, diffusion, social networks, product lifecycle, dominant design

JEL classification code: C15, L11, L15, O14, O33

UNU-MERIT Working Papers ISSN 1871-9872

  


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