Capturing Structural Complexity of Innovation Diffusion through System Dynamics: A Discussion on Model Development, Calibration, and Simulation Results

1. Introduction

Innovation is an important topic of high intellectual and research visibility in the study of economics, business, entrepreneurship, design, technology and engineering. Colloquially, the word “innovation” is often referred synonymous with the output of the process. However, business practitioners and economists tend to focus on the process of innovation itself, from the origination of an idea to its transformation into something meaningful, to its implementation; and on the system within which the process of innovation unfolds.

Joseph Schumpeter defined economic innovation in “Theorie der Wirtschaftlichen Entwicklung”-The Theory of Economic Development (Schumpeter, 1934). Traditionally, innovation management deals with all stages of the innovation process (Schumpeter, 1961):

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  Invention, i.e., the phase where new products are developed;

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  Innovation, i.e., the phase of introducing new products in the market;

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  Imitation or diffusion, i.e., the spread of new products in the market.