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Modeling of Internet Diffusion in Balkan Countries

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 The 6th International Virtual Scientific Conference on Informatics and Management Sciences
Modeling of Internet Diffusion in Balkan Countries
Alma Braimllari (Spaho)
University of Tirana
Department of Applied Mathematics
Tirana, Albania
Abstract—Internet has become part of everyday life for many
people after its commercialization and rapid growth. Empirical
evidence shows that Internet has significant economic effect and
richer countries possess higher concentrations of Internet users
in comparison with poorer countries. This paper aims to study
the diffusion process of Internet for Albania, Bosnia &
Herzegovina, Bulgaria, Croatia, Greece, Macedonia FYR,
Romania and Slovenia. The main objective of this research is to
model and predict the level of Internet diffusion using the World
Bank data of percentage of Internet users and to compare the
obtained results. After it was confirmed that the diffusion of the
Internet follows the S-shaped curve, the Logistic and Gompertz
models were estimated using STATA. The parameters of Logistic
and Gompertz models give information on the Internet diffusion
speed and the maximum potential percentage of Internet users.
These findings about Internet diffusion rate are useful for
providers of Internet service and products, customers and policy
makers.
Keywords- prediction, Logistic model, Gompertz model, STATA
I. INTRODUCTION
The development of information technology has reduced
the information processing costs and the internet has facilitated
the communication. Internet has experienced exponential
growth, however, diffusion rates across countries differ
enormously. Empirical evidence shows that richer countries
have higher rates of internet users in comparison with poorer
countries. The huge gap of Internet between wealthy and poor
countries has resulted in many of the negative consequences
that arise from the uneven diffusion of industrial and network
technologies in the world economy [1]. Internet is a key
technological change which has significant economic effect
and has become an incredibly valuable informational resource.
According to [2], recent studies have found correlation
between GDP and Internet adoption levels by region. The
interaction between the Internet and key dimensions of
development was examined by [3] and some conclusions were
derived for government intervention, including the important
role of intermediary institutions in linking the local to the
global developments goals. The Internet is a powerful
technology that will have a long-term impact on the quality of
life in developing countries [4].
Much of the literature approximated the S-shaped curve for
technological diffusion using either the logistic curve or
Gompertz curve. Both of these generate S-shaped curves with a
few early adopters, then a more rapid period of adoption, then a
slower conclusion. The Gompertz curve is less symmetric than
the logistic curve, wherein the initial growth rate is not as high
and its decline more gradually.
Econometrics and statistical methods
10.18638/ictic.2017.6.1.319
March, 26. - 30. 2017, www.ictic.sk
Enxhia Sala
University of Tirana
Department of Applied Mathematics
Tirana, Albania
Internet technology diffusion rules have been studied by
many researchers. Some researchers try to interpret the Internet
diffusion by applying innovation diffusion models. Logistic,
Gompertz and Exponential models were used by [5] to fit and
predict American Internet diffusion. Their results showed that
Exponential model was better than the Logistic and Gompertz
models, and they proposed that Logistic and Gompertz models
always explain the diffusion from the internal effect, but ignore
the external effects such as government policy, sponsorship,
commercial sponsorship and technological developments.
To fit the Internet diffusion data of United States and India,
[6] incorporated external factors from perspective of system
dynamics in Exponential, Gompertz and Logistic models,
which provided better Internet diffusion prediction results.
In their study, [7] used diffusion models to analyse the
Internet diffusion of Heilongjiang Province in China; they tried
to compare and to find a suitable model that can describe its
Internet diffusion state. The result showed that Gompertz
model had the best performance in describing its Internet
diffusion.
In their study about internet diffusion in the Africa
continent for the period 1993-2008, [8] showed that the
Internet Diffusion rates followed a S-shaped behavior pattern
and that the regions of the world are in different phases of the
diffusion process. Using the logistic function, they estimated
the speed of Internet diffusion and the maximum (potential)
percentage of Internet Users in Africa, Latin America,
European Union (15 states) and USA & Canada.
Using logistic and bi-logistic models with annual data, [9]
modeled Internet diffusion rate in Albania, Greece, Slovenia,
and Croatia for the period 1995-2014. It was found a higher
growth rate and a lower saturation level of internet diffusion in
Albania compared to Croatia, Greece and Slovenia.
The main objective of this research is to model and predict
the level of Internet diffusion in eight Balkan countries, in
order to help businesses and policy makers to implement the
most suitable strategies. Once it confirmed that the diffusion of
the Internet follows the S-shaped diffusion curve, it was
estimated the logistic function and Gompertz function with
three parameters, using STATA. The parameters of both
models give information on the Internet diffusion speed, and
the maximum potential percentage of Internet Users in each
country in the study. The best models results for each country
are also compared.
eISSN: 1339-9144, cdISSN: 1339-231X
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 The 6th International Virtual Scientific Conference on Informatics and Management Sciences
II. MATERIALS AND METHODS
A. Diffusion models for internet technology
The literature on the diffusion of emerging technology
generally uses S-curves to predict the diffusion process.
Because the new technology typically at first grows slowly,
then exhibits a growth rate greater than 1, followed by a period
of slower growth (growth rate less than 1) and finally reaches
obsolescence and stops developing. The empirical S-curve
literature, in the technology-diffusion context has tended to
focus on just two functional forms: logistic model and
Gompertz model [10], [11]. Both these models represent a S-
shaped curve describing technology diffusion among specific
populations and can provide the demanded forecasting at the
aggregate (population) model, rather than at the individual
customer level.
The logistic model is described by the differential equation
y  ay(c  y)
where y(t) represent the total diffusion at time t, c the
saturation level (the maximum expected level) of the Internet
technology and a is the coefficient of diffusion which
describes the diffusion speed and correlates the diffusion rate
with the actual and maximum penetration. The saturation level
of diffusion is a critical and often questionable parameter [12].
The diffusion speed is proportionate to the population that has
already adopted the service, denoted by y and the remaining
market potential represented by (c-y).
The solution the logistic model (1) is given by
c For forecasting, a model that fits best to the in-sample data
y (t ) 
1  e a (t t0 )
where y(t) is the estimated diffusion level at time t; c is the
maximum level of diffusion such that c  lim y(t ) ); a is the
t 
speed of convergence of y(t) to its limit and describes the
curvature of the diffusion path or speed of diffusion; t0 is the
moment of time when y(t )  2c , that is the moment of time
when technology diffusion achieved half of its maximum
level.
The Gompertz model is described by the differential
equation
y  a y(ln c  ln y)
The solution of which is given by
 a ( t t0 )
y(t )  cee (a > 0)
where c is the upper limit of the solution path or maximum
penetration rate, c  lim y(t ) ; a is a measure of the speed of
t 
convergence of y(t) to its limit and describes the curvature of
the diffusion path or speed of diffusion; t0 is the moment of
time when y (t )  ce , that is the moment of time when
technology diffusion achieved the share 1/e ≈ 36.8% of its
maximum level.
Econometrics and statistical methods
10.18638/ictic.2017.6.1.319
March, 26. - 30. 2017, www.ictic.sk
The important feature of the Gompertz path is that the
diffusion goes faster at the beginning but becomes slower over
time. This leads to a relatively short period of rapid expansion
and to a relatively long period of gradual growth up to the
maximal level. The logistic curve is more symmetric, the
growth rate (measured as y / y ) is initially not as high as in the
Gompertz curve and it declines more gradually [13].
These two S-shaped curves are appropriate for best fitting
and accurate forecasting the Internet diffusion rate.
B. The data
The annual data used for this analysis are taken from the
World Bank database [14]. The dataset contains information
about Internet Users per 100 inhabitants for Albania (1995-
2015), Bosnia and Herzegovina (1996-2015), Bulgaria (1993-
2015), Croatia (1993-2015), Greece (1991-2015), Macedonia
FYR (1995-2015), Romania (1995-2015) and Slovenia (1995-
2015). The Serbia, Montenegro and Kosovo are not included in
(1) the sample because of the lack of data about Internet users for
initial years (period of time before 2003). The lack of data for
the first years may have important consequences in the
estimation of the diffusion process of a new technology [15].
An Internet user is an individual who has used the Internet
from any location in the last 12 months. Internet can be used
via a computer, mobile phone, personal digital assistant, games
machine, digital TV etc.
For parameters estimation of the Logistic and Gompertz
functions was used the nonlinear least squares method and
STATA software.
(2) does not necessarily provide more accurate forecasts.
Therefore, the performance of out-of-sample forecasts is used
to help for the selection of a diffusion model. The out-of-
sample data cover the last two years (2014-2015).
The choice of functional form for a particular technology
provides important insights. It helps to describe the dynamics
of the trend. Certain technologies are described best by one
functional form and other technologies by another. There are
many different model selection criteria [16]. The Akaike
Information Criteria (AIC) and Bayesian Information Criteria
(BIC) are used here to select the best fitted model. The best
model is the model which has the lowest value of AIC and
BIC. To evaluate the performance of the best fitted model and
(3) the best forecasting model was also used the Root Mean Square
Error (RMSE) given by the equation:
n
 ( y  yˆ )
1
(4) RMSE  i i
2
(5)
n i 1
III. RESULTS AND DISCUSSION
The figure 1 shows the internet diffusion rates for Albania,
Bosnia & Herzegovina, Bulgaria, Croatia, Greece, Macedonia
FYR, Romania and Slovenia during the period under study,
each following a S-curve pattern. Internet penetration rates
were low until year 2000, and then the rates were increased for
all the countries. During all the period, the internet penetration
rate was higher for Slovenia compared to other countries.
eISSN: 1339-9144, cdISSN: 1339-231X
- 54 - ISBN: 978-80-554-1325-9
 The 6th International Virtual Scientific Conference on Informatics and Management Sciences
March, 26. - 30. 2017, www.ictic.sk

80

70 Albania
60 Croatia
50 Bosnia&Herzegovina

40 Greece
Macedonia, FYR
30
Bulgaria
20
Slovenia
10
Romania
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Figure 1. Internet Diffusion rates

A. Internet diffusion models
The models obtained for all countries in the study are
statistically significant and the parameters of the models are
statistically significant at 1% level (table I and table II).
The results of Logistic model for Albania indicated a
maximum level of Internet diffusion of 57.7% and the speed of
convergence to the maximal level was 0.756. Internet diffusion
has achieved half of its maximum level in year 2008. The
results of Gompertz model indicated a maximum level of
Internet diffusion of 64.46%, the speed of Internet diffusion
was 0.412 and half of its maximum level was achieved in 2007.
The result shows that logistic model has the best performance
TABLE I. ESTIMATED PARAMETERS OF THE INTERNET DIFFUSION MODELS
in describing the Internet diffusion rate. The fit of each model
is measured by the values of AIC, BIC, and RMSE. These
measures indicated that logistic data fits best to the actual data,
whereas the Gompertz model is the best to predict the
percentage of Internet Users.
The results of table I indicated that the Gompertz function
fits best for internet technology diffusion in Bosnia &
Herzegovina and also is the best model for predicting Internet
diffusion rate. The results of Gompertz model showed a
maximum level of Internet diffusion of 70.4%, the speed of
Internet diffusion was 0.221 and half of its maximum level was
achieved in 2006.

Albania Bosnia&Herzegovina Bulgaria Croatia

Parameter Logistic Gompertz Logistic Gompertz Logistic Gompertz Logistic Gompertz
c 57.69* 64.46* 59.42* 70.39* 56.05* 67.15* 67.84* 80.31*
*
a 0.756 0.411* 0.421 *
0.221* 0.408 *
0.203* 0.343 *
0.179*
t0 2008.23* 2007.64* 2007.23* 2006.47* 2006.04* 2005.3* 2005.4* 2004.45*
N 19 19 18 18 21 21 21 21
R2 adj 0.997 0.995 0.991 0.995 0.998 0.997 0.995 0.998
AIC 71.51 79.95 90.29 79.90 61.43 79.41 97.64 79.74
BIC 74.35 82.79 92.96 82.57 64.57 82.54 100.77 82.87
RMSE
In-sample 1.356 1.69 2.51 1.88 0.91 1.39 2.14 1.4
Out-of-sample 4.73 1.29 6.42 3.68 0.64 1.49 4.23 1.19
a
Significance level: * , p < 1%.

The results of diffusion models for Bulgaria indicated that
the Logistic function fits best for internet technology diffusion,
and also is the best model for prediction. The results of
Logistic model indicated a maximum level of Internet diffusion
of 56.05%, the speed of Internet diffusion was 0.408 and half
of its maximum level was achieved in 2006.
The Gompertz function fits best for internet diffusion rate
in Croatia and also is the best model for prediction of diffusion
rate. The results of Gompertz model indicated a maximum
level of Internet diffusion of 80.3%, the speed of Internet
diffusion was 0.179 and half of its maximum level was
achieved in 2004.
Among two estimated models, the Gompertz function gave
accurate fitting and predictions for internet technology
diffusion in Greece. The results of Gompertz model indicated a
maximum level of Internet diffusion of 96.15%, the speed of
diffusion was 0.123 and half of its maximum level was
achieved in 2007.
The Gompertz function fits best to the data for internet
technology diffusion in Macedonia FYR and is the best model
for prediction. The results of Gompertz model indicated a
maximum level of Internet diffusion of 78.6%, the speed of
Internet diffusion was 0.195 and half of its maximum level was
achieved in 2005.

Econometrics and statistical methods eISSN: 1339-9144, cdISSN: 1339-231X

10.18638/ictic.2017.6.1.319 - 55 - ISBN: 978-80-554-1325-9
 The 6th International Virtual Scientific Conference on Informatics and Management Sciences
March, 26. - 30. 2017, www.ictic.sk

TABLE II. ESTIMATED PARAMETERS OF THE INTERNET DIFFUSION MODELS

Greece Macedonia, FYR Romania Slovenia

Parameter Logistic Gompertz Logistic Gompertz Logistic Gompertz Logistic Gompertz
c 67.34* 96.15* 66.28* 78.59* 50.45* 61.33* 73.46* 82.81*
a 0.286* 0.123* 0.379 *
0.195* 0.390 *
0.196* 0.344* 0.188*
t0 2006.83* 2007.25* 2006.1* 2005.25* 2006.37* 2005.7* 2003.25* 2002.08*
N 23 23 19 19 21 21 21 21
R2 adj 0.997 0.998 0.991 0.993 0.996 0.997 0.997 0.996
AIC 89.15 72.15 100.66 95.45 78.03 71.46 100.10 100.59
BIC 92.55 75.56 103.49 98.28 81.16 74.60 103.23 103.72
RMSE
In-sample 1.47 1.02 2.92 2.55 1.34 1.15 2.27 2.3
Out-of-sample 4.58 1.22 5.66 2.54 6.54 3.68 0.672 2.81
a
Significance level: * , p < 1%.

The Gompertz function fits best to the data about internet highest for Greece (96.15%) and the lowest for Bulgaria
technology diffusion in Romania and also is the best model for (56.05%).
prediction. The results of Gompertz model indicated a
maximum level of Internet diffusion of 61.33%, the speed of B. Prediction of Internet diffusion rate
Internet diffusion was 0.196 and half of its maximum level was In the figure 2 are shown the actual and predicted data for all
achieved in 2005. the countries in the sample. The logistic model was used to
predict the Internet diffusion in Bulgaria and Slovenia. The
The Logistic function fits best for internet technology
Gompertz model was used to predict Internet diffusion rate for
diffusion in Slovenia and is the best model for prediction. The
results of Logistic model indicated a maximum level of Albania, Bosnia & Herzegovina, Croatia, Greece, Macedonia
Internet diffusion of 73.5%, the speed of Internet diffusion was FYR and Romania.
0.344 and half of its maximum level was achieved in 2003. The Internet diffusion rate will continue to increase and the
maximum rate of diffusion is predicted to be achieved around
Comparing the estimated parameters of the best fitted the year 2036 for Albania (64.64%), after year 2040 for
models, it can be noticed that Albania has the highest estimated Bulgaria and after year 2050 for Bosnia & Herzegovina,
speed of diffusion of 0.756 followed by Bulgaria (0.408) and Croatia, Greece, Macedonia FYR and Slovenia.
Slovenia (0.344), whereas Greece has the lowest speed of
diffusion of 0.123. The maximum diffusion rate was the
100
80

80
60

60
40

40
20

20
0
0

1980 2000 2020 2040 2060 1980 2000 2020 2040 2060
year year

Internet Users per 100 inhabitants Albania Fitted Gompertz Albania Internet Users per 100 inhabitants Greece Fitted Gompertz Greece
Internet Users per 100 inhabitants Bulgaria Fitted Logistic Bulgaria Internet Users per 100 inhabitants Macedonia, FYR Fitted Gompertz Macedonia FYR
Internet Users per 100 inhabitants Bosnia&Herzegovina Fitted Gompertz Bosnia & Herzegovina Internet Users per 100 inhabitants Romania Fitted Gompertz Romania
Internet Users per 100 inhabitants Croatia Fitted Gompertz Croatia Internet Users per 100 inhabitants Slovenia Fitted Logistic Slovenia

Figure 2. Actual and predicted Internet diffusion rate using Logistic and Gompertz functions

models, it is found than Albania has the highest estimated

IV. CONCLUSIONS speed of Internet diffusion, whereas Greece has the lowest
Developing models that explain the growth process is speed of diffusion. Related to the maximum Internet diffusion
critical for policy formulation, capacity planning and rate, Greece has the highest rate and Bulgaria has the lowest
introduction of new products and technologies. Internet growth rate. The logistic model can be used for predicting Internet
projection informs providers of Internet products and service diffusion rate in Bulgaria and Slovenia, whereas the Gompertz
about the potential consumer base. model to predict Internet diffusion rate in Albania,
Bosnia&Herzegovina, Croatia, Greece, Macedonia FYR and
In this paper, Logistic and Gompertz models were used to Romania.
describe and to forecast Internet diffusion rate in eight Balkan
counties. Comparing the estimated parameters of the best fitted

Econometrics and statistical methods eISSN: 1339-9144, cdISSN: 1339-231X

10.18638/ictic.2017.6.1.319 - 56 - ISBN: 978-80-554-1325-9
 The 6th International Virtual Scientific Conference on Informatics and Management Sciences
Once identified, the accurate forecasting model, Logistic or
Gompertz, can be useful for modeling aspects, such as the
saturation level, of the future path of a new technology.
In the future research, the determinants of Internet diffusion
rate such as GDP per capita, cost of a local phone call, number
of phone lines, number of computers per capita, mobile
diffusion rate, etc., can be studied using panel data modeling.
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