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International Conference on Complex Systems (ICCS2006)

Dynamic Modeling of New Technology Succession: Projecting the Impact of Macro Events and Micro Behaviors on Software Market Cycles

Sharon Mertz
Southern New Hampshire University

Adam Groothuis
Southern New Hampshire University

Philip Fellman
Southern New Hampshire University

     Full text: PDF
     Last modified: May 27, 2006

The subject of technology succession and new technology adoption in a generalized sense has been addressed by numerous authors for over one hundred years. During the last decades of the 20th century, researchers have applied techniques of chaos and complexity theory to describe technology succession rates and model market shifts. Technology adoption and market dynamics are influenced by both macro-level events at the global and regional level, and micro-level behaviors within and between corporations. In the ICT industry, macro-level factors affecting technology adoption and subsequently forecasts of enterprise software spend include global events and shocks, economic factors, and global regulatory trends. Micro-level elements involve individual agent (buyer and supplier) actions and interactions in the context of macro events. Models which accommodate both macro-level events as well as micro-level actions are needed to gain insight to future market outcomes.
The Windrum-Birchenhall model of technological succession in the presence of network externalities provides a starting point for modeling technological succession based on firm innovation driven by consumer preferences. The objective of the research is to use systems dynamic modeling to reproduce the model, then further evaluate it to determine:

• Its applicability to illustrate technology adoption in a scenario involving multiple suppliers (competing technologies) and buyers (adopters)
• Appropriate modifications to key elements which refine the model’s usefulness in both a theoretical and commercial environment
• How the model can be generalized, then adapted, to reflect other macro events and micro-level agent responses in the software technology markets

Further testing of the model shows that certain buyer and supplier characteristics and parameters require modification in order to adequately reflect actual technology adoption cycles and market trends. Initial enhancements result in a generalized base framework which is then extrapolated to reflect the impact of economic shocks and market shifts induced by supplier actions. Continued testing indicates observable trends driven by price/design ratios and impacted by both externalities and agent behaviors.

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