A System Dynamics Analysis of Innovation Diffusion inside a Mature Industry. The Case of the Italian Bakery Industry

Abstract This paper presents a System Dynamics analysis of the diffusion of innovation in a mature sector, using the Italian bakery industry’s transition away from palm oil as a case study. Triggered by growing health concerns and scientific evidence, the diffusion process began with a first-mover strategy targeting health-conscious consumers. The subsequent bandwagon effect, amplified by media coverage and distributor support, led to the rapid adoption of palm oil-free products across the industry. The study explores the reinforcing and balancing feedback loops that shaped the transition, contrasting the strategic behaviour of early adopters and resistant incumbents. The findings show that innovation diffusion in mature markets can be driven by consumer values, cultural dynamics, and communication strategies. The paper concludes with recommendations for simulation-based modelling to improve our understanding of the co-evolution of demand, firm behaviour, and innovation adoption dynamics.