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Soft InnovationEconomics, Product Aesthetics, and the Creative Industries$
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Paul Stoneman

Print publication date: 2010

Print ISBN-13: 9780199572489

Published to Oxford Scholarship Online: May 2010

DOI: 10.1093/acprof:oso/9780199572489.001.0001

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The Diffusion of Soft Innovations

The Diffusion of Soft Innovations

Chapter:
(p.192) 8 The Diffusion of Soft Innovations
Source:
Soft Innovation
Author(s):

Paul Stoneman

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199572489.003.0008

This chapter considers alternative models of the demand for (diffusion of) soft innovations. From the several models, the list of factors shown to be important in the innovation process includes the level and, particularly, changes in costs of generating and developing innovations, fixed costs of production, variable production costs, the number of suppliers, the allocation of buyers' preferences, buyers' knowledge bases, buyers price, and technology expectations and the nature of the product. The theoretical analysis in Chapters 7 and 8 also jointly shows that there is no guarantee that free markets will produce a welfare optimal outcome. The outcome may involve either too much or too little variety and innovation. The market failure thus identified can come from a number of sources. One general source is that there are positive or negative externalities in the market that drive a wedge between private and social incentives. Other factors such as creative destruction effects and the standing on shoulders effects also have a role to play.

Keywords:   consumer preferences, diffusion, expectations, free markets, knowledge bases, production costs, variety, welfare optimality

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