In recent years, the time interval between successive generations of high-technology electronic products has been demonstrated to be relatively brief in comparison with the time interval between replacing technologies using historical norms. As the time interval between technologies decreases the importance of understanding the impact of recent technologies on earlier ones increases. No matter what their advantages, newer technologies are not adopted by all potential buyers immediately. Rather, a diffusion process is set into motion. The newer technology may widen the market by allowing applications which were not feasible before. It will also provide an opportunity for buyers of earlier technologies to substitute the more recent technology for earlier ones. These substitution effects will ultimately diminish the potential, if not the actual sales, of earlier technologies. This research develops a diffusion of innovation model which captures both adoption and substitution effects. In addition the models will have applications in forecasting overall industry demand as well as market share for various devices. The unique contribution of this research is the development of a parsimonious explanatory model of the innovation diffusion process which considers substitution decisions as well as the increasing rate by which newer technologies are replacing earlier ones. Since the time interval between generations of technologies is diminishing it is important to gain an understanding of the impact of later technologies on the earlier ones.
