New product diffusion model for a lagging country using the product diffusion information in a leading country

Abstract

To refine the Bass model, most researchers have implicitly assumed that a sufficiently long time series of data is available. However, managers have not enough time to collect a sufficiently long time series of data for predicting the diffusion rates. Therefore, managers cannot help using their intuitions or simple heuristics that lack logical justifications. We develop a diffusion framework by postulating that the vectors of coefficients representing the impact of country-specific (CS) and product-specific (PS) variables in a leading country are equal to those of a lagging country. The model allows us to predict the diffusion patterns of the new products in lagging countries when few or no data points are available. Furthermore, by relating the parameter estimates to various dimensions of CS and PS variables, this model allows the diffusion parameters to differ systematically across countries as well as along time periods for an innovation in a country.