  Different technological domains have significantly different rates of
performance improvement. Prior theory indicates that such differing rates
should influence the relative speed of diffusion of the products embodying the
different technologies since improvement in performance during the diffusion
process increases the desirability of the product diffusing. However, there has
not been a broad empirical attempt to examine this effect and to clarify the
underlying cause. Therefore, this paper reviews the theoretical basis and
focuses upon empirical tests of this effect across multiple products and their
underlying technologies. The results for 18 different diffusing products show
the expected relationship-faster diffusion for products based on more rapidly
improving technological domains- between technological improvement and
diffusion with strong statistical significance. The empirical examination also
demonstrates that technological improvement does not slow down in the latter
parts of diffusion when penetration does slow down. This finding indicates that
diffusion slow down in the latter stages is due to market saturation effects
and is not due to slowdown of performance improvement.
