The Economic Journal, g8( December 1988),1032-1054 Printed in Great britain INNOVATION, DIVERSITY AND DIFFUSION: A SELF-ORGANISATION MODEL Gerald Silverberg, Giovanni Dosi and Luigi orsenigo The diffusion of new products and new processes of production within and between business enterprises is clearly one of the fundamental aspects of the process of growth and transformation of contemporary economies It is well known that the diffusion of new products and processes takes varying lengths of time: some economic agents adopt very early after the development of an innovation while others sometimes do it only after decades Moreover, during the diffusion process the competitive positions of the various gents(adopters and non-adopters)change. So do the economic incentives to adopt and the capabilities of the agents to make efficient use of the innovation Finally, the innovation being adopted also changes over time, due to more or less incremental improvements in its performance characteristics which result in part from its more widespread use. Contemporary analysis of diffusion has been essentially concerned with the following questions:(a)why is a new technology not instantaneously adopted by all potential users?(i.e. what are the 'retardation factorspreventing instantaneous diffusion? ),(b)how can the dynamic paths of diffusion be represented? and(c)what are the relevant variables driving the process? However, innovation diffusion has rarely been formally treated as part of a more general theory of economic dynamics in which diversity of technological capabilities, business strategies, and expectations contribute to shape the evolutionary patterns of industries and countries(a remarkable exception is the evolutionary approach developed in particular by Nelson and winter (I982) who, however, are more concerned with the general features of industrial dynamics than with the specific characteristics and implications of the diffusion In this work, we shall analyse the nature of diffusion processes in evolutionary environments characterised by technological and behavioural diversity amongst the economic agents, basic uncertainty about the future, learning and disequilibrium dynamics shall identify some fundamental characteristics of technology innovation and diffusion which, we suggest, must be accounted for in theoretical models. Second, against this background, we shall briefly review s We gratefully acknowledge co ts on an earlier paper on which this work is participants at the International Conference on Innovation Diffusion, Venice, I7-21 March 1986, and onymous referees and Associate Editor, The work of one of us(Silver as partially supported by a grant from the Deutsche Forsch haft while the research of one of us(Dosi) has been part of the activities of the Designated Research Centre, sponsored by th R C. at the Science Policy Research Unit(SPRU), University of Sussex [1o32