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Has the Internet Accelerated the Diffusion of New Products?

36 Pages Posted: 17 Dec 2008 Last revised: 13 May 2014

Jeffrey Prince

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Daniel H. Simon

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

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Date Written: April 1, 2009

Abstract

In this paper we measure the effect of Internet adoption on consumers’ propensity to adopt a wide range of diffusing products. To do this, we utilize a rich panel of household surveys on purchases of relatively new technology products. Our results indicate that the Internet accelerates product diffusion, but with varying magnitude. In an attempt to determine the mechanisms underlying this effect, we find direct evidence that the Internet does not increase product awareness. However, we find suggestive evidence that the Internet increases adoption rates both through access to increased information about new products (via online research) and through online shopping. We also find that the magnitude of the Internet’s effect is strongly tied to diffusion rates, and especially familiarity rates. This finding is consistent with Internet access having the greatest impact on the adoption of products with more developed marketing strategies (i.e., more developed information sources and online markets). Our findings indicate that the Internet helps bolster demand for products early in their diffusion process, and they suggest that improved access to information and the convenience of online shopping are likely the primary drivers of this effect. Consequently, to the extent that accelerated diffusion of new products is (on net) desirable, our findings may provide a further argument toward social promotion of Internet adoption.

Keywords: Internet, Diffusion, New Products, Rank Model, Epidemic Model

JEL Classification: O33

Suggested Citation

Prince, Jeffrey and Simon, Daniel H., Has the Internet Accelerated the Diffusion of New Products? (April 1, 2009). Available at SSRN: https://ssrn.com/abstract=1316982 or http://dx.doi.org/10.2139/ssrn.1316982

Jeffrey Prince (Contact Author)

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States

Daniel H. Simon

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

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