Professor of Entrepreneurship
Firms seek to imitate innovations that yield competitive advantage, but imitation can presage disappointment. Because the value of innovation is initially highly uncertain, the firms that adopt early may discover that the innovation is less valuable than expected, and the firms that imitate them will make the same discovery.Empirical research has only rarely examined the diffusion of such disappointing innovations, and it is not known whether negative information from past adopters becomes available soon enough to halt the diffusion process. Likewise, heterogeneity in the value of an innovation across firms complicates managerial attempts to learn from prior adoptions, but has not been systematically investigated. Here, a unique dataset on the diffusion of an innovation with heterogeneous value across firms, including negative value for many, is used to examine how adoption decisions are imitated, but actual use and subsequent abandonment can yield information that reduces the likelihood that others will adopt it.The findings show imitation of the adoption decisions of other firms, but avoidance of the innovation once these firms start using the innovation or abandon it.