Hiccups in the adoption of innovation for complex financial models

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Southern New Hampshire University
There exists a vast and growing body of literature that describes the mechanisms by which innovations diffuse through a population, as well as factors that affect the speed of adoption of an innovation. This body of literature tends to focus on incidences of successful innovations. However, study of innovations that fail to diffuse widely may be equally valuable. Furthermore, major diffusion research has not addressed financial innovation in a meaningful way (Rogers, 2003). This paper focuses on complex state-of-the-art financial innovations, developed and proposed by academicians as solutions to real-world problems. This paper (1) discusses a novel financial strategy based on the use of sophisticated financial engineering products; (2) the adoption (or lack thereof) of complicated real option evaluation models to augment capital budgeting decisions; and (3) a case study to highlight implementation issues for a highly complex fixed income option model. A revised version of this paper has since been published in the journal Advances in Financial Education. Please use this version in your citations.
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