European Journal of Marketing 27,5 22 Received June 1992 Revised March 1993 An Integrated Model of Organizational Adoption and Diffusion of Innovations Ruud T. Frambach Tilburg University, The Netherlands ‘Technology has become an important strategic business asset for many markets and firms. Since technology can be a distinctive competence, it may contribute significantly to the success of a firm in the marketplace. That is, technology may be the source of a competitive advantage. Therefore, managing technology effectively has become crucial in today's competitive environment (see e.g. [1)) ‘An important issue in the management of technology is the development and marketing of technological innovationst2,3). An innovation can be defined as ‘an idea, practice, or object perceived as new by an individual(4). This definition often refers to innovations adopted by consumers. In the business-to-business market, however, innovations are to be viewed in the face of “new production inputs, machines, processes, and techniques adopted by firms or entrepreneurs for their own use.(5,61" From a (marketing) management point of view, itis especially interesting to identify the variables which determine the ate and speed of adoption of an innovation in the market. Diffusion theory can give more insight concerning the matter!7,8).. Shanklin and Ryans state that “the concept of diffusion of technological innovations ... is the basis for developing useful high-tech market insights, for effectively researching high-tech markets, and for formulating consequent marketing strategies that prove capable of achieving the company’s goals” [8, p. 81]. However, in explaining individual adoption decisions (e.g. consumers’ or firms’) diffusion theory in general, and diffusion research in marketing in particular, have taken anadopter-side perspective, mostly ignoring the influence of thesupplier of the innovation on the adoption process. Diffusion researchers in different disciplines point out the relevance of supply-side factors in explaining the process of adoption and diffusion of technological innovations (for example, in economies{9}, in geography{6l, and in marketing{10)). Considering the fact that research on the influence of a supplier of innovation on its success in the marketplace has been undertaken for quite some time now in the areas of innovation management and industrial marketing, it is suprising that these research findings concerning the role of the supply-side have not been integrated in the diffusion model.Integrating research on innovation management and industrial marketing in diffusion theory is especially relevant in two areas. First, variables related to the entire processof development of an innovation by a supplier firm can influence the acceptance of the innovation after its introduction in the marketplacel4 pp. 134-51). Research on the management of innovations has identified several factors which determine the level of market performance of new products. These findings relate directly to the influence of prediffusion activities on adoption and diffusion processes and therefore should be incorporated in the diffusion model. In this respect one can also consider the impact of the extent to which the supplier and potential adopter of an innovation have been working together during the innovation development process (see {111). Second, industrial marketing literature makes it clear that the supplier of a technological innovation can exercise a direct influence on the diffusion process of the innovation by means of its marketing strategy. Brown states that ‘‘the diffusion of technological innovations also involves a conscious strategy on the part of the propagators that affects both the spatial and temporal patterns of diffusion”(6, p. 1721. Diffusion research has largely ignored the strategy pursued by the supplier of an innovation! 121. Since this can be an important variable in explaining processes of adoption and diffusion, itshould be considered in the diffusion model. Based on the foregoing, the objective of this article is to integrate the research findings of innovation diffusion theory on the one hand and the insights on innovation management and industrial on the other in a conceptual model of innovation diffusion. The focus is on organizational adoption of innovations, which has received less attention in literature than innovation adoption in consumer markets{131. In order to achieve the desired integration, an elaboration of diffusion theory will be given first. Second, research findings on the influence of variables conceming the innovation development process and marketing strategy on the diffusion process will be discussed. In section four the presented theory will be integrated in a model of innovation diffusion. Finally, section five draws conclusions and derives managerial implications as well as issues for future research. ‘The Diffusion Paradigm Research on the diffusion of innovations has been the interest of many scientific disciplines over the last few decades. As Rogers{14,15} points out, innovation diffusion has emerged as one of the most multidisciplinary research topicsin the social sciences today. This has led tothe emergence of acommon diffusion paradigm. The main elements of the process of diffusion of innovations have been described by Rogers{41 as: an innovation, which iscommunicated through certain channels, over timel161, among the members of a social system. The adoption process of decision-making unit and the way it is influenced lie at the heart of the diffusion paradigm. Adoption and Diffusion of Innovations 23European Journal of Marketing 27,5 24 The Adoption Process The innovation adoption process is defined by Rogers{4, p. 163) as ‘‘the process through which an individual or other decision-maker unit passes from first knowledge of an innovation, to forming an attitude toward the innovation, toadecision to adopt or reject, to implementation of thenew idea, and to confirmation of this decision”. Other research (see for example [171) has outlined the adoption process in a similar way. In the case of the adopting unit being an organization, theadoptingdecision will often be made by a “buying center” (see for exampie [18]). This is a decision-making unit, consisting of people who each play a different part in the buying process and therefore exert a definite influence on the adoption decision. Dependent on the buying situation (‘“new task buy”, “modified rebuy”, ‘‘straight rebuy"’ [19], the adoption process will involve more people, will take longer and therefore will be more complex altogether. In this respect, the innovation adoption decision is the most complex one that an organization will be faced with, because no experience on the buying process of the particular product (the innovation) exists (in the words of Robinson et al. [19] ‘“new task buy"). Adoption of an innovation is defined by Rogersl4, p. 1721 as “a decision to make full use of an innovation as the best course of action available”. Now we will take a closer look at the variables which are identified in diffusion research as being of influence on the innovation adoption decision. Characteristics of the adopting organization, characteristics of the innovation itself, the availability of information, information- processing characteristics of the (potential) adopter, and the competitive environment of both the adopter and the supplier will be discussed. Adopter Characteristics Before the 1960s, diffusion research in the social sciences focused on individuals as adopters of innovations. In economics, an amount of research on industrial diffusion emerged in the 1960s(e.g. Mansfield, see (201). However, this research sought to explain the observed patterns of diffusion in terms of rational decision making by potential adopters (longitudinal), instead of seekingan explanation of the adoption decision by the individual firm through identification of the variables influencing this decision (cross-sectional). This can be explained by the fact that economists are interested in explaining economic growth at an aggregated levell21], while other social sciences are more interested in explaining individual (in this case organizational) behaviour. Nowadays, we observe a growing interest in industrial diffusion in the latter disciplines; in the discipline of marketing, for example, diffusion research is more and more conducted in the business-to-business market{10,221,whereas previous research has been focused primarily on consumers as the adopters of innovations{13). Some characteristics of organizations have been found to be of influence on the innovation adoption decision{23,24). The variable most often found to be positively related to the adoption of innovations is the size of an organization(251. Due to the size of an organization a certain critical mass may be present, which justifies the adoption of particular innovations. Also, for larger organizations there may be a greater necessity to adopt some innovations than for smaller ones(26], Furthermore, several variables concerning the organization structure influence the innovativeness of an organization. A higher level of complexity of an organization, as such beinga function of the number of specialists in the organization and their professionalism|27 p. 33], may facilitate adoption of an innovation. The diversity in background of the members of the organization may enlarge the number of information sources by means of which an organization may become aware of the existence of an innovation(24, p. 135; 28]. The same argument holds for the degree of specialization in an organization, which refersto the degree of division of labour(29, p. 7171. Other variables, such as the degree of formalization (the emphasis placed within the organization on following rules and procedures in performing one’s job) and centralization of an organization (the degree to which power and control in a system are concentrated in the hands of relatively few individuals) have been found to be negatively related to its degree of innovativeness{4,24,301. The participation of members of an organization in an informal network of relations facilitates the spread of information on a certain innovation and, therefore, may have a positive influence on its rate of adoption (interaction effect) 124, pp. 146-71. Conclusion: The probability of an organization adopting an innovation (sooner) increases with its size, and/or level of complexity, andior degree of specialization, andior members participating in informal networks on a more extensive basis; the probability of an organization adopting an innovation (sooner) decreases with its degree of formalization, andior degree of centralization Information As was outlined earlier, a potential adopter passes through certain stages before a decision is made on whether to adopt or reject an innovation. The extent and time of leaving behind certain stages in the adoption process is dependent on the information available and the information- processing charactertistics of the potential adopter. The probability that an organization adopts an innovation over a certain period of time may be influenced by the quantity, quality and value of the information availablef31l. The availability of information depends considerably on the level of communication-activity of the Adoption and Diffusion of Innovations 25supplier of the innovation, on the one hand, and on the extent to which potential adopters communicate with “third parties” (e.g. adopters of the innovation, advisors), on the other: The former source of information was found to be of relatively greater importance during the “knowledge” phase of the adoption process, while the latter source of information was relatively more important in the stage of “‘persuasion"[4, p. 19]. Clark and Staunton{32, p. 131] point out that diffusion research has focused only on the influence of available information on the adoption decision without considering the question whether information is supplied actively to potential adopters in the first place. In this respect, postponement of adoption of an innovation in some cases may not be contributed to factors related to the potential adopter himself, but to the lack of information supply. It will be clear that the supplier of the innovation plays an important role in making information available. Therefore, this article proposes to consider marketing (eg communication) activities distinctively in the diffusion model. The quality of the available information refers to its ability of reducing uncertainty to the potential adopter of an innovation. The value of the information concerns the relative advantage which the information offers to the potential adopter. Conclusion: The probability of an organization adopting an innovation (sooner) increases with the availability of information, the quality of the available information, and the value of the available information. Information Processing Characteristics Ina recent empirical study, Gatignon and Robertson{22, p. 451 conclude that “the decision-maker’s information-processing’ characteristics contribute significantly in separating adopters from non-adopters” of an innovation. The more willinga potential adopteris to receive information onan innovation and the greater the capability of the recipient to process the information received, the higher the probability will be of the innovation being adopted. This all depends on the absorption capacity of the potential adopter, which refers to the knowledge and ability of an organization to judge and process certain information in order to make as efficient as possible use of the information within the organizationl33, p. 1171. Tt may be the case, especially for small companies, that ‘an organization lacks the knowhow to process potentially valuable information adequately(34]. In that case the information-processing activity has to be delegated to. third party. Once a third party is found to be trustworthy, the advice given by him is valued highly by a decision maker whose information absorption capacity is restricted. Conclusion: The higher the information absorption capacity of an organization, the more receptive it will be to innovations.Innovation Characteristics Research has revealed a number of characteristics of an innovation, as perceived by a potential adopter, to be of influence on its rate and speed of adoption[4,35]. Although in literature no standard classification of innovation characteristics, influencing the process of adoption, has yet been derived, the influence of several innovation characteristics has found empirical support on a larger sc Rogers{4] identifies five characteristics of an innovation which are generalized in their relation to the degree of adoption of that innovation in a social system. The relative advantage of an innovation, defined as ““‘the degree to which an innovation is perceived as being better than the idea it supersedes”, has been found in research to be one of the best. predictors of the rate of adoption of an innovationl4, p. 218;36). Especially, the innovation adoption decision in the business-to-busine market will be a result of the search for and prospects of relative advantages (i.e. improved profitability[31, p. 37;37, p. 83]. The compatability of an innovation, defined as “the degree to which an innovation is perceived as consistent with the existing values, past experiences, and needs of potential adopters”, is generalized to be positively related to its rate of adoption(4, p. 226;38;39]. The more an innovation is compatible with the current situation of a potential adopter and his needs, the lesser are his switching costs and uncertainties, the more probable it is the innovation will be adopted. As regards the complexity of an innovation, defined as ‘the degree to which an innovation is perceived as relatively difficult to understand and use’’, Rogers generalizes it to be negatively related to its rate of adoption|4. p. 231). The trialability of an innovation and its observabilityl40] are generalized to be positively related to the rate of adoption of the innovation(4, p. 2311 ‘The innovation characteristics put forward by Rogers[4] should be supplemented with considerations of uncertainty[41-431. Uncertainty is in several major ways involved in the adoption process of an innovation. First, the potential adopter is uncertain as to whether advantages of the innovation (e.g. concerning cost saving or quality improvement), as promised by the supplier, will be realistic. The extent of the relative advantage of the innovation is not known for sure before adoption has taken place. Second, the potential adopter faces uncertainty regarding the implementation of the innovation in its organization. In order to bring. ‘the performance of the innovation up to the required or expected level, additional efforts, unknown prior to adoption of the innovation, may have to be made. Therefore, the uncertainty surrounding an innovation might make a potential adopter postpone the decision either to adopt or reject the innovation. Furthermore, expectations of fast technologies development among potential adopters of a certain technological innovation may retard its adoption. Potential adopters may be uncertain as to the emergence of technology standards and the length of the Adoption and Diffusion of Innovations 27European Journal of Marketing 27,5 28 technology life cyclef12I. It being the case, such expectations form an inhibition of the process of adoption and diffusion of the innovation, because the potential adopter may consider the postponement of adoption of the innovation to be the most profitable strategy[44; 45, p. 201. Conclusion: The relative advantage, compatibility, trialabiity and observability of a technological innovation, as percieved by potential adopters, are positively related to Itsrate of adoption; the complexity of an innovation, the uncertainty surrounding its adoption and expectations of fast technological development among potential adopters are negatively related to the rate of adoption of the innovation. Competitive Environment Robertson and Gatignon{101 proposed an extended behavioural paradigm of technology diffusion among organizations in order to incorporate competitive effects on the diffusion process in the extant paradigm outlined by Rogers!4]. The propositions made by Robertson and Gatignon are mainly based on the literature of industrial organization and include competitive effects on technology diffusion of both the supply-side and the adopter-side. However, empirical research does not always give clear support to the proposed relations. In most. cases, ‘unambiguous support is only found concerning the relation between the competitiveness of a market and the rate of diffusion of an innovation in that market{33, p. 143; 46, p. 1021. A high level of competition among firms in a certain industry may enlarge the pressure on an individual firm to adopt a certain technological innovation. In case this firm would not do so, it may find that the adoption of that specific innovation by other firms may create a competitive disadvantage for it (see eg Romeo in{47, p. 951). Conclusion: The speed and rate of adoption of an innovation by organizations in a certain industry will be positively related to the degree of competitiveness of that industry. Extending the Diffusion Paradigm In the previous section a general survey was given of research findings concerning the variables influencing organizational innovation adoption behaviour: Ithas become clear to us that although a number of authorsin the field of economics and marketing have incorporated supply-side factors analytical models of diffusion, the influence of the supply-side on the organizational adoption processin the behavioural domain hasnot been given the attention it should have. The relevance of such variables hasbeen pointed out by a number of researchers (see e.g.(4, 6, 10, 321). In the field of consumer diffusion, Brown(6] has developed a “market and infrastructure perspective” which focuses on the process by whichinnovations and the conditions for adoption are made available to individualsand households(6, p. 71, thus recognizing the supply aspect of diffusion. Based primarily on the industrial marketing literature, Brown concludes that the view that there exists a distinct supply-side in the diffusion of technological innovations finds support and he stresses the importance of the development of a conceptual framework of the diffusion of technological innovationsin the business-to-business market (6, p. 169). Preliminary empirical research in this regard supports such a view (22, p. 46] 22: “Supply-side factors . .. are found to be particularly important in explaining adoption”. Also the role of the change agent in accelerating diffusion processes of social relevant innovations has been recognized{4, ch. 91. However, the conceptualization of supply factors in the behavioural diffusion paradigm has been limited only to the Robertson and Gatignon modell101. In the introduction to this article, several areas related to the supplier of an innovation were identified as relevant to the process of adoption and diffusion of (organizational) innovations. Based on empirical findings reported in the literature of innovation management and industrial marketing, conclusions can be drawn as to the influence of supply-side variables on the rate of adoption innovations. Integrating these findings in the diffusion model enhances our understanding of adoption and diffusion processes. This will be the focus of the next section. Now the variables which relate to the supplier of an innovation will be elaborated on. First, the development process which precedes the diffusion of an innovation will be discussed. Especially, the impact of choices made at this stage of the innovation development processon the diffusion process later on, is of importance. Second, the influence of a supplier operating in a network of suppliers’ (potential) buyers and other factors on the development and diffusion process of an innovation will be considered. ‘Third, attention will be given to marketing strategies of suppliers by means of which the rate of diffusion of an innovation can be accelerated!48] Innovation Development Process ‘The literature on strategic management has emphasized the importance of considering technology in the strategic posture of the firm (see €.g.149)). Since technology may play an essential part in the success of an organization in the marketplace, it should be considered explicity in the strategy formulation process (see e.g,(2I). In this respect, the firm will have to formulate a technology strategy, which “consists of policies, plans and procedures for acquiring knowledge and ability, managing that knowledge and ability within the firm and exploiting them for profit” 3}. Choices have to be made as to whether new technologies will be developed within the firm or will be acquired from elsewhere(50, 511 Such decisions may have a significant influence on the success of products, derived from those technologies, in the market. Adoption and Diffusion of Innovations 29European Journal of Marketing 27,5 In innovation management literature, a relatively large body of research has emerged investigating the determinants of new industrial product performancel52-58). Lilien and Yoonl59) have given an overview of empirical research on this subject. Based on this, they drew up a summary of the main determinants of industrial product perform- ance. With regard to this, four categories of variablesare identified which determine the success of an innovation in the marketplace: (1) Business strategic and organizational factors, including general management's support and involvement; business-project fit; and R&D-manufacturing-marketing interaction, These factors are controllable by management at the corporate level in the long run. (2) R&D and production factors, including the relative superiority or uniqueness of the innovation; experience and synergy effect in R&D and production{601, user benefit or economic advantage of the innovation (cf. “relative advantage” of the innovation); role of product champion; and patent protection. These factors are controllable by management through internal decisions and resources. (8) Marketing factors, including experience and efficiency in marketing and interaction with potential customers. These factors are also controllable through internal marketing decisions and allocation of resources. Interaction with potential customers can be given form in several ways. We will elaborate on this matter lateron. (4) Market and environmental factors, which include the degree of competition in the market (c.f. “competitive environment") and the market size and growth rate. These factors cannot be controlled by the decisions made by the management of the individual firm. Determinants of industrial product performance which are controllable by management are dependent on the way in which the innovation development process is organized within the firm. The innovation development process consists of several stages. Therefore, itis defined by Rogersas “all of the decisions, activitiesand theirimpactsthatoccur from recognition of a need or problem, through research, development, and commercialization of an innovation, through diffusion and adoption of the innovation by users, to its consequences” [4, p. 1351 Based on the product success and failure research, both Cooper{54] and Zinger and Maidique(58) have set up a model of new industrial product development, incorporating the critical factors necessary to develop successful new industrial products. The model proposed by Cooperl54l is a normative seven-stage process model, which goes into the activities a firm has to undertake so that it will be able to create successful industrial products(61]. The Zirger and Maidique(58] model is one of lesser detail. It describes the innovation development process in terms of the organizational and external entities that influence product outcome. Organizational entities include the three primary groups involvedin product development: R&D, manufacturing and marketing (also seel621). The competences of the functional groups, their planning of the development process and the co-operation between the groups are considered in the model. External entities included in the model comprise market characteristics, such as degree of competitiveness, market size and growth. An empirical test of the model underlined the importance of variables comparable to the ones summarized by Lilien and Yoon[59}. The commitment of a capable organization to the development of an innovation, offering significant value to the potential adopter, is crucial in innovation development{58, pp. 879-801. An important instrument for accomplishing this, is the understanding of the needs of the customers by interacting with them during the process of development. Conclusions: The speed and rate of adoption of a technological innovation by ‘organizations will be positively related to the extent that the supplier firm has given ‘more support tothedevelopment ofthe: innovation; andiorhas given moreattention to the incorporation of the innovation project in its overall strategic posture; and/or has given more attention tthe creation ofan innovative ‘climate within the organization; andiorhas given more attention to the development ‘of a unique and superior product in the eyes of the potential adopter; andior can take advantage of past experiences or synergy more easily than its competitors ‘The speed and rate of adoption of a technological innovation by organizations will be positively related to the extent that the supplier firm has a better level of organization and execution of the innovation-development process within its organization. Supplier- Buyer Interaction and Networks In the foregoing, the degree to which an innovation offers significant value to potential customer and the degree of compatibility to its needs and wants were identified asimportant determinants of the success of an innovation. In other words, the extent to which a supplier succeeds in meeting customer needs when offeringa new product, is essential to the performance of that product in the marketplace (c.f.[4, p. 319). Especially in the business-to-business market this will be a factor of crucial importance. For, in the case of industrial markets, innovations adopted by organizations will be implemented in the adopters’ specific needs{63]. In order to avoid potential problems and to be able to offer a product that meets well with the customer's needs, the supplier of an innovation may decide to co-operate with potential adopters during the process of development of the innovation(64,651. In the literature this is known as the interaction approach to innovation development [11, p.67;66;671. Especially, the International Marketing and Purchasing Adoption and Diffusion of Innovations 31European Journal of Marketing 27,5 32 (IMP) group has studied the development of innovationsin such cases. An important condition for interaction between a supplier and buyer is the existence of an explicit (long-term) relationship between them. ‘The Swedish branch of the IMP group has developed the concept of innovation development by means of interaction between suppliers and buyers further, by incorporating other parties in this process as welll68]. Since the process of innovation development. requires knowledge from diverse sources, the main parties involved in the development process will also have to interact with other parties in order to acquire such knowledge (cf. “technological infrastructure''I511). Therefore, a network of interacting parties can be involved in the development of an innovation (also see[691). The existence of such anetwork may accelerate the rate of diffusion of the innovation by the time it finds introduction in the marketplace(76] Conclusion: The speed and rate of adoption of a technological innovation by “organizations will be positively related to the extent that the supplier firm has interacted with other parties (especially potential adopters of the innovation) more intensively during the innovation development process. Marketing Strategy of the Supplier ‘The most fundamental choice a supplier will have to make when marketing a new product, is whether to be a “market pioneer” or a “follower”, ie. when to enter the market. This decision will concern a trade-off of the risks of premature entry (enter too early) and the problems of missed opportunities (enter too late){71). Within this broad framework, a firm has to decide next how to enter the market(72-751 Based on a review of academic literature, the business press and interviews with marketing managers of high technology companies, Easingwood and Beardi76] have identified four main groups of market. launch strategies of new industrial products, aired at accelerating the rate of early adoption. The first alternative to consider is the possibility of working with other producers in order to educate potential users and expand total primary demand. The co-operation can take two important forms. Ones to share the technology with others so as to increase total demand (especially in the case of network externalities, or to increase total marketing effort in the marketplace) and prevent users being confronted with competing and incompatible technologies (by setting a technology standard). The other is to educate a target audience (ie. other producers of similar technologies; the target market) as to the workings of the new technology. This can provide the basis to an accelerated diffusion of the innovation. ‘The second marketing strategy to consider concerns the positioning ofthe innovation in the marketplace. By identifying the potential “early adopters” in the market, marketing efforts can be concentrated on these ‘groupsin ordertoaccelerate the initial rate of adoption of the innovation Such can be accomplished by either approaching innovative adopters, heavy users of the product category, or heavy users of the preceding technology. Innovative adopters are those early buyers of new products who are undeterred by the risk of early adoption. Other groups of early adopters include heavy users of the technology that the new product is intended to replace. Especially the effect of adoption of an innovation by early adopters on the adoption decision of others in the market. is important for the diffusion process to take off ("‘contamination effect"). Analytical new product diffusion models in marketing have examined such effects ((71). Another possilibity of achieving a fast market penetration is to pursue a rapid-penetration strategy, which consists of launching the new product at a low price and spending heavily on promotion!78, p. 355] ‘The third group of marketing strategies, as observed by Easingwood and Beard(76), which are being used by companies to accelerate diffusion, were directly intended to reduce the risks associated with early adoption. Risk and uncertainty are in several ways factors involved in the adoption of an innovation|41]. The supplier of the innovation can use several approaches to reduce the risk of adoption. First, the innovation may be given on trial to the customer for a certain period of time. Second, the supplier may decide to absorb the total risk of adoption. Insome cases of high-technology marketing this may be necessary to gain market acceptance. Ultimately, success of an innovation depends on the reputation it gathers in the marketplace. Therefore, winning market support can be identified as another important category of marketing strategies. A supplier can try to gain market support in several ways. The research conducted by Easingwood and Beard{(761 revealed three approaches. The first approach is to win the endorsement of opinion leaders. In the business-to-business market one may think of approaching key persons in decision-making units of firms, or persons from outside the firm who may influence the adoption decision (ie. consultants, accountants). The second approach is to establish a “winner” image in the marketplace by creating instant success. This may be accomplished by investing substantial resources into the launching of the new product. The final approach identified by Easingwood and Beard is to “legitimize” the product by publicizing the names of those organizations which have already adopted the innovation and whose endorsement contributes an air of “legitimacy”. Ideally, this would create a substantial word-of-mouth communication from adopter to potential adopters. Adoption and Diffusion of Innovations 33European Journal of Marketing 27,5 34 Conclusion: The speed and rate of adoption of an innovation by organizations will be positively related to the extent that the supplier firm has pursued a marketing strategy of: co-operation with other suppliersby sharing the technology or educating some target audience (including other producers); and/or positioning the innovation in the market by approaching innovative adopters, heavy users of the product ‘category, heavy users of the preceeding technology andor setting a penetration price; and/or reducing the risk of adoption by offering atrial period or absorbing all, the risk involved for the potential adopter; and/or winning market support by ‘winning the endorsement of opinion leaders, establishing a winner image, or legitimizing the product in the marketplace. ‘An Integrated Framework of Organizational Innovation Diffusion Integrating the findings of research on innovation management and industrial marketingin the diffusion model contributestosolvingseveral of the main points of criticism on diffusion research. Rogers(15] has pointed out that diffusion research has been suffering from a pro- innovation bias (also see [791) and from individual blame. The latter refers to the fact that in diffusion research individuals are held responsible solely for their actions and not the system which they are part of. This means that the decision either to adopt or not adopt an innovation is, attributed only to the individual and not to influences of the supplier of the innovation. Obviously this is unrealistic, because a potential adopter may well be persuaded by a supplier to adopt an innovation. Recognizing this and integrating such variables in the diffusion model as proposed, meets the “individual blame” objection to diffusion theory. The pro- innovation bias refers to the presumption of an innovation always being the best course of action. However, the observation that a substantial number of potential adopters decide not to adopt the innovation in a particular case may not be attributable to these individuals themselves. It may well be the case that the system is at fault. for not providing an innovation more appropriate to the individual's needs, and so the individual may be well justified in rejecting the new idea{151. Non-adoption may be the ‘result of poor innovation management in the sense that the supplier did not have a proper understanding of customer needs. Incorporating factors related to the innovation management process in the diffusion model should help to identify innovation-related factors which could underly the non- adoption decisio Explicitly taking account of the influence and role of activities undertaken by the supplier of an innovation as reported in literature on innovation management and industrial marketing in diffusion theory, leads to the formulation of an integrated framework of innovation diffusion. Figure 1 shows the variables which determine the rate of adoption and diffusion of an innovation in the business-to-business market. Because the arrows drawn in this figure do not all imply causal relations, Table I presents an overview of the relation of the identified variables to adoption behaviour. Based on the relevance of diffusionRelative advantage ‘Compatibility Complexity ‘Tralability Observability Uncertainty Expectations technology Competitive environment: Competitiveness industry + innovation |. | tacnnoiogy |, 4, Customer ‘+ : a | Strategic! | Network r } / ' 1 Relation Relation | as Adoption and Diffusion of Innovations 35 Figure 1 ‘An Integrated Framework of Organizational Innovation Diffusion, ‘Table I. Organizational Innovation DiffusionEuropean Journal of Marketing 275 36 theory to the understanding of the complex issue of marketing (technologically) new products{80] and the necessity of avoiding partial consideration of the empiricial adoption and diffusion problem, an integrated approach is required. Conclusions and Managerial Implications In this article, research findings on the influence of a supplier of an innovation on the process of diffusion of the new product, drawn from the literature on innovation management and industrial marketing, are integrated with the current diffusion paradigm. The need for such an integration is primarily twofold. First, it has been recognized by diffusion researchers that the influence of the supply-side on processes of adoption and diffusion of innovations has received little attention in previous research. This is surprising, because of the fact that the importance of supply-side variables has been acknowledged by several researchers in the field of diffusion and because of the observation that research findings from areas like innovation management and industrial marketing can be used to enhance the understanding of innovation diffusion in the business-to-business market. Second, main points of criticism on diffusion research can be addressed by taking an integrative perspective, which considers the factors involved in diffusion of innovationstoa broader extent. The objections of the pro-innovation bias and “‘individual blame” of diffusion theory in particular, are met. The framework of organizational diffusion of innovations presented here integrates research findings on factors influencing processes of adoption and diffusion from several sources thereby enhancing the understanding of these processes. By gaining insight in the determinants of the acceptance of new products in the marketplace, one can more adequately formulate one’s marketing strategy, and, therefore, improve the marketing performance of new products. Several managerial implications of the presented model of innovation diffusion can be formulated, First, the model shows that the supplier can play an important role in shaping the diffusion process of an innovation. Although giving explicit attention to the development. process of an innovation and formulating a marketing strategy for the new product may seem logical activities to be undertaken by the supplier, their impact ‘on the success of the innovation in the marketplace is often underestimated or even ignored entirely (c.f. [591). Second, this article has made it clear that the success of an innovation in the marketplace is dependent on a large number of factors. Suppliers of an innovation should be aware of their potential impact on the process of adoption and diffusion of an innovation and of their interdependency. Applying the integrated framework of organizational innovation diffusion, as presented here, can enhance such an understanding. Third, the mode! draws attention to the fact that non-adoption of an innovation in the marketplace may well be attributable to the supplier marketing the newproduct instead of the decision-making unit considering adoption of the innovation. This being the case, a need for formulating marketing policy focused specifically at non-adopters of an innovation may arise [81]. Notes and References 1. Wilson, L., “The Strategic Mangement of Technology: Corporate Fad or Strategic Necessity?", Long Range Planning, Vol. 19, No. 2, 1986, pp. 21-2. 2. Capon, N. and Glazer, R., ‘Marketing and Technology: a Strategic Coalignment”, Journal of Marketing, Vol. 61, July 1987, pp. 1-14. 3. Ford, D., ““Develop your Technology Strategy", Long Range Planning, Vol. 21 No.5, 1988, pp. 88-95. 4. Rogers, E.M., Diffusion of Innovations, 3rd ed., The Free Press, New York, NY, 1983. 5. Inthiscase the innovationsare often termed firm or technological innovations — see Malecki, 1975, in(6], 6. Brown, L.A., Innovation Diffusion, Methuen & Co., London/New York, NY, 1981. 7. Although Metcalfel8, p. 561) makes the explicit distinction between adoption ‘analysis, which considers the decisions taken by adoption agents to incorporate a new technology into their activities, and diffusion analysis, which is concerned with how the economic significance of a new technology changes over time, the research of variablesinfluencing the (individual) adoption decision of an agent (behavioural) soften carried out underthe heading ‘diffusion research’” The present study isalso part of such research, 8. Metcalfe, J.S., “The Diffusion of Innovation: An Interpretative Survey’ in Dosi et al. (Eds}, Technical Change and Economic Theory, Pinter Publishers, London New York, NY, 1988. 9. Stoneman, P and Ireland N. “The Role of Supply Factor in the Diffusion of New Process Technology", Economic Journal, Vol. 83, 1983. 10. Robertson, TS, and Gatignon, H., “Competitive Effects on Technology Diffusion’ Journal of Marketing, Vol. 50, July 1986, pp. 1-12. 11. Hkansson, H., (Ed.), International Marketing and Purchasing of Industrial Goods; ‘An Interaction Approach, John Wiley, Chichester, 1982, 12. Gatignon, H. and Robertson, T.S., “Diffusion of Innovation”, in Kassarsian, H.H. and Robertson, T'S. (Eds), Handbook of Consumer Theory and Research, Prentice- Hall, Englewood Cliffs, NJ, 1991. 13, Day, R.L.and Herbig, P.A., “How the Diffusion of Industrial Innovationsis Different from New Retail Products”, Industrial Marketing Management, Vol, 19, 1990, pp. 261-6. 14, Rogers, E.M., “Three Decades of Research on the Diffusion of Innovations: ‘Progress, Problems, Prospects", paper presented at the Conference on Innovation Diffusion, Venice, 18-22 March 1986. 15. Rogers, E.M., ““The Diffusion of Innovations Model”, paper presented at the NATO ‘Advanced Research Workshop on Modeling the Use and Diffusion of Geographic Information Technologies, Sounion, Greece, 8-11 April 1992. 16. Time is involved in diffusion in (a) the innovation-decision process, which involves ‘the mental stages through which an individual or other decision-making unit passes inadopting the innovation; (b) innovativeness, referring to the degree to which one adopts innovations relatively earlier than others; an (c) an innovation’s rate of adoption. 17. Robertson, T.S., Innovative Behavior and Communication, Holt, Rinehart and Winston, New York, NY, 1971 18. Johnston, W.J. and Bonoma, TY., “’The Buying Center: Structure and Interaction Pattems”, Journal of Marketing, Vol. 45, Summer 1981, pp. 143-56. Adoption and Diffusion of Innovations 37European Journal of Marketing 27,5 38 24, 25, 26. 21. 28. 29. 36, 37. Robinson, P., Faris. and Wind, ¥., Industrial Buyingand Creative Marketing, Allyn and Bacon, Boston, MA, 1967. Freeman, C., “Diffusion: The Spread of New Technology to Firms, Sectors, and Nations" in Heertje, A. (Bd.j, Innovation, Technology, and Finance, Basil Blackwell, OxfordNew York, 1988. In an interpretative survey on the diffusion of innovation, Metcalf (21) treats diffusion and structural economic change as synonyms, Gatignon, H. and Robertson, T'S,, “Technology Diffusion: An Empirical Test of Competitive Effects”, Journal of Marketing, Vol. 53, January 1989, pp. 35-49. Zaltman et al. (24) consider the influence of organizational structure on the innovativeness of an organization at different stages of the innovation process (the iniUation stage and the implementation stage). However, since the innovation adoption decision of an organization is the specific interest of this section (the initiation stage), the focus will be on the relationship between organization structure characterisitics of the potential adopter and the probability of adoption of aan innovation. Zaltman, G., Duncan, R. and Holbek, J.M.A., Innovations and Organizations, Wiley, New Yori, NY, 1973. Kennedy, M., “The Adoption and Diffusion of New Industrial Products: A Literature Review", European Journal of Marketing, Vol. 17, 1983, pp. 31-88. Kimberley, J.R. and Evanisko, MJ. "Organizational Innovation: The Influence of, Individual, Organizational, and Contextual Pactors on Hospital Adoption of ‘Technological and Administrative Innovations”, Academy of Management Journal, Vol. 24 No, 4, 1981, pp. 689-713. Hage, J. and Aiken, M., Social Change in Complex Organizations, Random House, New York, NY, 1976. Cohn, SF and Turyn, R.M., “Organizational Structure, Decision-Making Procedures, and the Adoption of Inovations'’. IEBE Transactions on Engineering ‘Management, Vol. EM-BI No. 4, 1984, pp. 154-61, Moch, M.K. and Morse, EN., ‘Size, Centralization and Crganizational Adoption of Innovations", American Sociological Review, Vol. 42, October 1977, pp. 716-25, ‘The influence of the centralization variable on the innovativeness of a firm may depend on the organizational level at which information on a certain innovation is available first. In this respect, Kimberley and Evanisko [26] hypothesized that adoption administrative innovations is positively related to the degree. of Centralization of the adopter. However, the proposed relationship was not found to be significant, Webster, PE. Jr, “New Product Adoption in Industrial Markets: A Framework for Analysis" Journal of Marketing, Vol. 33, July 1969, pp. 5-9. Clark, P. and Staunton, N., Innovation in Technology andl Organization, Routledge, London’New York, NY, 1988. Baldwin, W.L. and Scott, JT, Market Structure and Technological Change, Harwood Academie Publishers GmbH, Chur, Switzerland, 1987, Nooteboom, B., Zwart, PS., Bijmolt, T:H.A., "Problems in Advising Medium-sized ‘and Small Companies", Maandblad voor Accountancy en Bedrjfveconoraie, Vol. 64 No. 10, 1990, pp. 378-87, (in Dutch). ‘Tornatzky, LG. and Klein, K.J., “Innovation, Characteristics and Innovation Adoption implementation: A Meta-Analysis of Findings", [EEE Transactions on ‘Engineering Management, Vol. EM-29, No. I, February 1982, pp. 28-4. Robinson, WT, “'Product Innovation and Start-Up Business Market Share Performance", Management Science, Vol. 36 No. 10, 1980, pp. 1279-89. Chisnall, PM., Strategic Industrial Marketing, Prentice-Hall, Englewood Cliffs, NJ, 1989.38. 39. 40. 4 42, 46 a7, 48. 8 2 28 & . Nooteboom, B., “Inhibition of Progress and Risk of Introduction: Two Problems |. Weiss, A.R. and Bimbaum, PH. Although Robinsont36) did not find a(n) (negative) impacton the intial marketshare ‘of a supplier marketing an innovation which is incompatible with the customer's ‘current way of doing things. Cooper and Zmud{38l, on the other hand, found support for the premiss that the compatibility of an innovation with managerial tasks isa major factor in explaining information technology adoption behaviour Cooper, R:B. and Zmud, RW., “Information Technology Implementation Research: ‘A Technological Diffusion Approach”, Management Science, Vol. 36 No. 2, 1190, pp. 128-89. Respectively defined as “the degree to which an innovation may be experimented with on a limited basis" and “the degree to which the results of an innovation are visible to others” Nooteboom, B., “Diffusion, Uncertainty and Firm Size”, International Journal of Research in Marketing, Vol. 6, 1989, pp. 108-28, “Uncertainty” is related to the perceived risk of an innovation. The level of perceived risk is negatively related to thespeed of adoption of an innovation (43, p. 3621 . Gatignon, H. and Robertson, TS., “A Propositional Inventory for New Diffusion Research’, Journal of Consumer Research, Vol. 11, March 1985, pp. 849-67. the Marketing of New Technology", in Industrial and New Technologies Marketin Proceedings XVIth International Research Seminar in Marketing, IRET La Londe le Maures, 17-19 May 1989, pp. 230-46. Butler, J.E., “Theories of Technological Innovation as Useful Tools for Corporate Strategy", Strategic Mangement Journal, Vol. 9, 1988, pp. 15-29. Kamien, M.I. and Schwartz, N.L., Market Structure and Innovation, Cambridge University Press, 1982. ‘Stoneman, P,, The Economic Analysis of Technological Change, Oxford University Press, Oxford, 1983. ‘The influence of the supply-side variables on technology diffusion ean be measured by asking potential) adopters to what extent the consequences of the way in which suppliershave given attention to these variables influence their adoption decision. ‘Therefore, the measurement of he supply-side factors based on the perceptions of (potential) adopters Ansoft, H.L., Implanting Strategic Management, Prentice-Hall, Englewood Cliffs, NJ, 1984, Because of the fact that most companies will ot be capable of developingaall of the required technologies on their own, they will participate in a ‘technological infrastructure", which supports inter-organizational technology transer(51) ‘Technological Infrastructure and the Implementation of Technological Strategies”, Management Science, Vol. 35 No. 8, pp. 1014-26, Calantone, R. and Cooper, RG., “New Product Scenarios: Prospect for Success", Journal of Marketing, Vol. 45 No. 2 1981, pp. 48-60. Cooper, R.G., “The Dimensions of Industrial New Product Success and Failur Journal of Marketing, Vol. 43, Summer 1979, pp. 93-103 Cooper, RG., A Process Model for Industrial New Produet Development”, IEEE ‘Transactions on Engineering Management, Vol. EM-30 No. 1, 1983, pp. 2-11 Cooper, R.G., “Predevelopment Activities Determine New Product Success", Industrial Marketing Management, Vol. 17, 1988, pp. 237-47. Cooper, RG. and Kleinschmidt, B.J., “Success Factors in Product Innovation’, Industrial Marketing Mangement, Vol. 16, 1987, pp. 215-23 Adoption and Diffusion of Innovations 39European Journal of Marketing 27,5 40 61 62, 63. 64, 65, 66, 67, 70. 1. 7, 2. Maidique, M.A. and Zinger, BJ., “A Study of Success and Failure in Product Innovation: The Case of the U3 Electronies Industry", IEEE Transactions on Engineering Management, Vol. EM-31 No. 4, 1984, pp. 192-203, Zinger, BJ. and Maidique, M.A., “A Model of New Product Development: An Empirical Test”, Management Science, Vol. 36 No.7, 1990, pp. 867-83, . Lilien, G.L. and Yoon, S., “Determinants of New Industrial Product Performance: A Strategic fe-examination of the Empirical Literature”, IEEE Transactions on Engineering Management, Vol. 36 No. 1, 1989, pp. 3-10, Referringto a production and engineeringresource base which isboth strongas well as compatible with the innovation project{56. ‘Coopert64l distinguishes the following stages: (1) idea, (2) preliminary assessment, (8) concept, (4) development, (5) testing, (6) tril and (7) launch. Gupta, A.K., Raj, S.P. and Wilemon, J., “A Model for Studying R&D-Marketing Interface in the Product Innovation Process", Journal of Marketing, Vol. 50, April 1986, pp. 7-17. ‘Therefore, the innovation adoption process in organizations is usually considered. successful if it leads to implementation of the innovation and not just its adoption, perse (12, p. 1d) Urban and Von Hippelf651 conclude that so-called "lead user analysis" can improve the productivity of new produet development in industrial markets ((65, p. 5791) “Lead users” of a novel product are defined as ‘'those who display two ‘characteristics with respect to it: (1) lead users face needs that will be general in a marketplace, but face them months or years before the bulk of that marketplace encounters them, and (2) lead users are positioned to benefit significantly by ‘obtaining a solution to these needs” (165, p. 5681). ‘Urban, G-L. and von Hippel, E., “Lead User Analyses for the Development of New Industrial Products”, Management Science, Vol. 34 No.8, 1988, pp. 569-82. In case the supplier firm has taken the initiative to develop an innovation and dominatesits development process, Von Hipel speaks of the “Manufacturer Active Paradigm’ (MAP). On the other hand, in case the initiatives taken by the customer and this party dominates the innovation development process, the "Customer ‘Active Paradigm” (CAP) is relevantI671 to acquire such knowledge. von Hippel, E., The Sources of Innovation, Oxforé University Press, New York/Oxford, 1988, | HAkansson, H. (Ed), Industrial Technological Development; A Network Approach, Routledge, London, 1987 (1989 reprint) Biemans, WG., Developing Innovations within Networks", PhD thesis, University of Technology, Eindhoven, The Netherland, 1989. Reddy, N.N., “The Domain of Technology Diffusion: Concept of Innovation Community”, in Industrial and New Technologies Marketing, proceedings XVIth International Research Seminar in Marketing, IRET La Londe les Maures, 17-19 May 1989, pp. 268-84 Lilien, G.L. and Yon, E., “The Timing of Competitive Market Entry: An Exploratory Study of New Industrial Products”, Management Science, Vol. 36 No.5, 1000, pp. 508-85. Several researchers have derived typologies of marketing strategies which firms confronted with a high level of environmental turbulence (e.8, technological development) might pursuel73.751. Since these strategies have a very broad character, it is difficult to hypothesize their relation to innovation diffusion, ‘Therefore, they will not be discussed here. Ansoff, H. and Stewart, J.M., “Strategies for a Technology-Based Business! Harvard Business Review, November December 1967, pp. 71-83.74, Freeman, C. The Economics of Industrial Innovation, Penguin Books, Baltimore, 1974, 7B. Miles, R.E. and now, CC. , Organizational Strategy, Structure and Process, McGraw- Hill, New York, NY, 1978, 76, Easingwood, C. and Beard, C., “High Technology Launch Strategies in the UK, Industrial Marketing Management, Vol. 18, 1989, pp. 125-38. ‘77, Mahajan, V., Muller, E. and Bass, FM., ""New Product Diffusion Models in ‘Marketing: 4 Review and Directions for Research”, Journal of Marketing, Vol. 4, January 1990, pp. 1-26. 78. Kotler, P, Marketing Management: analysis, planning, implementation, and control, Tih ed., Prentice-Hall, Englewood Cliffs, NJ, 1991, 79. Abrahamson, E., “Managerial Fads and Fashions: The Diffusion and Rejection of Innovations" Academy of Management Review, Vol. 16 No. 3, 1991, pp. 586-612. 80, Shanklin, W.L. and Ryans, J-K. J1, Marketing High Technology, Lexington Books, Lexington, MA, 1984. 81. Stevens, RE., Warren, G.B, and Martin, RT, “Nonadopters of Automatic Teller ‘Machines", Akron Business and Economic Review, Vol, 20 No. 3, 1989, pp. 55-53. Further Reading Bass, F. M., ‘A New Product Growth Model for Consumer Durables”, Management Science, Vol. 15, January 1969, pp. 215-27 Fourt, L.A. and Woodlock, JW., “Early Prediction of Market Success for Grocery Products”, Journal of Marketing, Vol. 25, October 1960, pp. 318, Mahajaran, V. and Peterson, R.A., Models for Innovation Diffusion, Sage, Beverly Hills, CA, 1986. Mansfield, E., “Technical Change in the Rate of Initiation”, Econometrica, pp. 741-66. Adoption and Diffusion of Innovations 41