New technology diffusion in vertical and longitudinal market segments

The process of diffusion of innovations has been thoroughly investigated in the past with a focus on the horizontal segmentation of the adopters. Rogers set the ground in the late sixties with its studies on agricultural communities, developing a framework with five categories of adopters with different acceptance attitudes towards new technologies. The main mathematical model used to describe the process of diffusion of innovation, theorized by Bass in the same period of the past century, analyses homogeneous populations, but is also based on the idea that a part of the customers spontaneously adopts new products, while followers subsequently imitate the behavior of the pioneers under the internal influence of a social network. Fewer studies in the field of diffusion of innovations are focused on the vertical segmentation of a market. For instance, Christensen, in its groundbreaking work on disrupting innovations, researched on new products and technologies that come in at the bottom of an overlooked or completely new market, but that is not the only possibility in real life (i.e. the introduction of automobiles). Most of the research on the topic is linked to the economic side of new technologies development, explaining how innovation can be an important factor for a firm to differentiate its products from the competition, with positive effects on profitability. In this thesis, the goal is to integrate the vertical segmentation of a market with the horizontal one, therefore creating a matrix segmentation, in order to study the pace of diffusion of innovation from a mathematical modelling standpoint. Furthermore, the objective is to analyze the saturation of different niches of the market to try and understand if, while some segments still have room for new sales, in some others the stimulation for substitution sales could be needed. Two opposite cases will be taken into account, with new products being introduced from the top or the bottom of a market. Then, the results will be analyzed to find the most relevant implications for managers and practitioners.