Adoption and Diffusion of Business Practice Innovations: An Evolutionary Analysis

This paper examines how innovative business practices are developed, diffuse across organizations, and effect industry-level change. Applying evolutionary economics and evolutionary organizational theory as a theoretical lens, it conceptualizes the adoption and diffusion of innovations as a dynamic process whereby innovations propagate vertically within firms via successive instantiations (or generations) as well as horizontally across firms via imitation and replication. Innovations that describe observable, transparent, and transferable business practices are the specific concern. Examples from management, software development, and e-commerce support the theoretical analysis. A two-level study, based on a formal stochastic process model, examines how innovations arise, which innovations do or do not survive in the market, and whether and under what conditions best practices emerge and industry standardization is achieved.