How information and communication technology affects decision‐making on innovation diffusion: An agent‐based modelling approach

• Date: 01 July 2018
• Author: Carlos M. Fernández‐Márquez,Francisco J. Vázquez
• Published date: 01 July 2018
• DOI: http://doi.org/10.1002/isaf.1430

RESEARCH ARTICLE

How information and communication technology affects

decision‐making on innovation diffusion: An agent‐based

modelling approach

Carlos M. Fernández‐Márquez |Francisco J. Vázquez

Universidad Autónoma de Madrid,

Departamento de Análisis Económico:

Economía Cuantitativa, Madrid, Spain

Correspondence

Carlos M. Fernández‐Márquez, Departamento

de Análisis Económico: Economía Cuantitativa,

Universidad Autónoma de Madrid, 28049

Madrid, Spain

Email: carlosm.fernandez@uam.es

Summary

We introduce a computational agent‐based model of innovation diffusion that allows

us to analyse the influence of information and communication technology (ICT) devel-

opment on decision‐making. Model dynamics are based on local emulation between

pairs of individuals that generate an evolving social network on which an innovation

is virally spread (by word of mouth). Results suggest that ICT development affects

the data usefulness for decision‐making by changing the topology of the social net-

work (the means whereby the innovation is propagated). Paradoxically, a higher level

of ICT development (providing a larger volume of data) narrows the differences

between better and worse launch strategies, thus reducing data‐driven decision‐mak-

ing usefulness, which then shows diminishing returns on the ICT level.

KEYWORDS

agent‐based model,decision‐making, ICT development, innovation diffusion

1|INTRODUCTION

The latest advances in information and communication technology

(ICT) make it easier to generate data,

1

driving forward an emerging field

of reality mining (Pentland & Pentland, 2008). If the current trend

continues, world data volume is expected to double at least every

2 years in the near future (Chen, Mao, & Liu, 2014). As a result, data‐

driven decision‐making has become increasingly important in both the

academic and the business communities over the past two decades.

Information theory (e.g.,Galbraith, 1974) suggests that more pre-

cise and accurate information should lead to higher firm performance.

There is a growing volume of case evidence that this higher perfor-

mance for data‐driven decision‐making is indeed true, at least in spe-

cific situations (e.g. Ayres, 2008; Brynjolfsson, Hitt, & Kim, 2011;

Davenport & Harris, 2007; Loveman, 2003). As a consequence, com-

panies gather extremely detailed data from their consumers, suppliers,

alliance partners and competitors, which are used to make business

decisions. Further on, cutting‐edge firms have moved from passively

collecting data to actively analysing it to develop new products and

choose optimal launch strategies.

However, little attention has been paid to the relationship

between data‐driven decision‐making usefulness and society's tech-

nological development; in particular, ICT development. Clearly, tech-

nologically advanced societies provide high‐quality databases and

highly skilled experts able to analyse and use such information produc-

tively. However, ICT development also transforms societies them-

selves (e.g. Bimber, 1998; Hussain & Howard, 2013), changing the

way people interact with each other, which in turn could have an

impact on decision‐making.

The main goal of this paper is to study this potential connection in

the context of innovation diffusion. Our approach is carried out in two

steps. On the one hand, we model an evolving social network on

which the effect of ICT development (measured by the frequency of

Internet usage in society) can be analysed. On the other hand, we con-

sider the diffusion of a new product with a significant social compo-

nent (e.g. in terms of prestige, status or style) over that network,

which will allow us to compare the performance of different launch

strategies. We wonder whether the social network properties

(affected by the ICT development level) could have some influence

on the innovation spread. Thus, data usefulness for making decisions

Received: 18 January 2018 Revised: 22 May 2018 Accepted: 22 May 2018

DOI: 10.1002/isaf.1430

124 © 2018 John Wiley & Sons, Ltd. Intell Sys Acc Fin Mgmt. 2018;25:124–133.wileyonlinelibrary.com/journal/isaf