Mathematical Model of the Impact of Social Media on Technological Innovation Diffusion

Abstract

Online reviews provide consumers with rich information that may reduce their uncertainty regarding purchases. As such, these reviews have a significant influence on product sales. In this paper we discuss a mathematical model which represents the process of diffusing technological innovations, laying much emphasis on social media as one of the major variables in the process of diffusion. The model is developed from a differential equation involving three most important parameters: the coefficient of innovation, the coefficient of imitation and another factor describing the impact of social media on prospective adopters. We calibrated this model for historical sales data from Tata Nexon and conducted a sensitivity analysis to determine what effect each parameter had on the adoption curve. This decomposition implies that small changes in coefficients have large consequences for the course of the diffusion of innovation trajectory. The findings suggest that social media are important in raising the speed of the adoption process, through the imitation effect particularly, and amplifying social influence. This study represents an innovation diffusion literature contribution by quantifying the ways to assess the impact of social media on technology adoption. From the findings, it is suggested that a firm can use social media effectively to enhance the diffusion of their innovations.