Factors Influencing the Adoption of Innovation: the Case of the Stock Options Launch in Singapore in 1992

ABSTRACT - Studies on the diffusion or adoption of innovation have to date concentrated on products or services which have already been diffused in the social system in question. This study examines the intention by potential adopters to adopt an innovation. The innovation in question is the launch of the stock option by the Stock Exchange of Singapore in 1992.


Geok Theng Lau and Jude, Kim Chooi Tan (1994) ,"Factors Influencing the Adoption of Innovation: the Case of the Stock Options Launch in Singapore in 1992", in AP - Asia Pacific Advances in Consumer Research Volume 1, eds. Joseph A. Cote and Siew Meng Leong, Provo, UT : Association for Consumer Research, Pages: 59-64.

Asia Pacific Advances in Consumer Research Volume 1, 1994      Pages 59-64


Geok Theng Lau, National University of Singapore

Jude, Kim Chooi Tan, National University of Singapore


Studies on the diffusion or adoption of innovation have to date concentrated on products or services which have already been diffused in the social system in question. This study examines the intention by potential adopters to adopt an innovation. The innovation in question is the launch of the stock option by the Stock Exchange of Singapore in 1992.


Traditional research on the diffusion or adoption of innovation has focused on products or services which have already been diffused in a social system. Rogers (1983) suggested that diffusion research does not necessarily have to be conducted after an innovation has diffused completely to members of a social system, and that it is possible to investigate the diffusion of an innovation while the process is still underway. This study seeks to do just that - by looking at an innovation yet to be introduced in a social system, and examine the intention of consumers in adopting that innovation. The innovation in question is the introduction of stock options in the Stock Exchange of Singapore (SES) in 1992. Although the product in question has been in place in many stock markets all over the world, and had been introduced and withdrawn by the SES over a decade ago, it can be seen as an innovation from the perspective of the majority of Singapore investors in 1991 and 1992.

This study attempts to identify the demographic, psychographic and behavioral characteristics of private investors which may provide predictive insights into their intention to adopt the innovation of stock options to be introduced by the SES in 1992. A secondary objective of this study is to examine the role of stockbrokers and research analysts as change agents in modifying the adoption profile of these investors.

The proposed stock options to be introduced by the SES are call options which give the buyer the right to 'call' away a specified number of shares of a given security from the option seller (writer) at a specified price, up to some indicated date.


In this section, we shall examine the conceptual issue of categorising adopters and review the socioeconomic, personality, behavioral, and change agent characteristics which may affect the intention to adopt an innovation. Relevant hypotheses are developed during the review.

Categorising Adopters

This study uses an approach adopted by many researchers of ongoing diffusions in breaking respondents into early and later adopters (Donnelly and Ivancevich 1974). The basis for early adopters will be those respondents who intend to adopt the stock option immediately after the initial launch to about six months after launch. Late adopters will be defined as those intending to adopt the instrument about one year after its launch as well as those who do not intend to adopt the instrument.

Socioeconomic Characteristics

Case, et al. (1982) and Choi (1979) found that socioeconomic characteristics in the areas of education and social class of potential adopters are positively related to adoption rates of innovative farm products and ideas. Lee (1977) found a positive correlation between the average level of education and adoption speed of birth control products in Korean villages. Rogers (1983), in his review of 279 studies, found a positive correlation between the level of adoption and the educational level of adopters, with 73% of the studies supporting this proposition. People with higher education tend to be able to assess an innovation more objectively rather than be given in to fears of the unknown. We hypothesize, thus, that:

H1: Early adopters of stock options have more years of education than later adopters.

Robertson and Kennedy (1968) found a positive correlation between "venturesomeness" (defined as willingness to take new product risks) and adoption rate. Rogers (1983), after reviewing 27 past research on diffusion of innovation, found that early adopters have a favorable attitude towards risk. People who are venturesome and are willing to take risks tend to be more willing to try out an innovation. We, thus, hypothesize that:

H2: Early adopters of stock options have a more favourable attitude towards risk than later adopters.

Rogers (1983) suggested that earlier adopters have "larger size units" than later adopters. We propose that people with greater financial income tend to be more willing to "try" stock options, since the instrument promises large gains, even though it can also result in large losses. The less well off may avoid the instrument for fear of incurring a "painful" financial loss. The third hypothesis, thus, is:

H3: Early adopters have greater financial income than later adopters.


Dogmatism is a variable representing a relatively closed belief system, a set of beliefs that are strongly held. A highly dogmatic person can be expected to cling on to old ideas and reject new ones. Rokeach (1960) states that low dogmatics act on information on their own intrinsic merits, unencumbered by irrelevant factors in the situation arising from within the person or from the outside. Jacoby (1971) found low dogmatic individuals to make significantly more innovative selections than did high dogmatic individuals. Blake, Perloff and Heslin (1970), however, found dogmatism to be significantly related to acceptance of recent products, but not to novel products. The stock options in this study can be considered a novel product to Singaporeans. On net, it is hypothesized that:

H4: Early adopters of stock options are less dogmatic than later adopters.

Stock option is a relatively complex instrument. People who are able to make a decision based on abstractions of what little they know about an innovation tend to adopt the instrument earlier. People who need to "observe" the true effects of an innovation will probably adopt the innovation later. We, thus, hypothesize that:

H5: Early adopters have a greater ability to deal with abstractions than later adopters.

A drive to get ahead may motivate investors to seek new avenues of investments. Aspirations for better education, standards of living, and so on, can motivate investors to seek more wealth by trying out new instruments and avenues of investments. Rogers (1971) found that 74% of the 39 studies he reviewed supported this proposal. We, thus, propose that people who have higher aspirations will find it difficult to forego the opportunity to adopt stock options to make more money, and hypothesize that:

H6: Early adopters have higher aspirations than later adopters.

Investors who make their own major stock investment decisions may transfer part of their knowledge in stocks into investing in stock derivatives. This is because call option prices tend to move in tandem with the price of the underlying security, thereby posing lesser degree of ambiguity to those who actively manage their own stock portfolios. As such, we are of the view that people who make their own investment decisions will actively look at how stock options affect their core stock investment portfolio and will likely involve themselves in stock options. We, then, hypothesize that:

H7: Early adopters of stock options make more of their own stock investment decisions than later adopters.

Communication Behaviour

Rogers (1983) generalizes that early adopters tended to communicate more as a whole than later adopters. Robertson (1971) suggests that early adopters have more change agent contact than later adopters. In the specific context of stock options, the change agents are usually the stock brokers. People who see and talk with their stock brokers more tend to learn more about stock options and are able to assess the instrument more objectively rather than being hampered by fears of the unknown. As such, we hypothesized that:

H8: Early adopters of stock options tend to see and talk to their brokers more often than later adopters.

Rogers (1983) found that 69% of the 116 studies on diffusion of innovation supported the idea that earlier adopters have greater exposure to mass media communication channels. Robertson (1971) suggested that such exposure to the media should be relevant to the product category concerned. For stock options, people who "listen in" and "market talk" through the media (for example, newspapers and television) and other sources (for example, newsletters of financial institutions) may be able to to keep abreast with features in stock options to better assess the risks and benefits of the instrument, rather than be subjected to fear of the unknown. They are, thus, more likely to give stock options a try. We hypothesized, then, that:

H9: Early adopters of stock options tend to be better informed of changes in the stock market than later adopters.

Change Agent Effects on Later Adopters

Rogers and Shoemaker (1971) identified seven roles played by change agents in influencing potential adopters of innovation: developing a need for change, establishing a change relationship, diagnosing a problem, creating intent to change, translating intent into action, stabilizing change and preventing discontinuances, and achieving a terminal relationship. The following hypotheses will attempt to predict the potential effects of the change agent (brokers) in altering the adopter profile of later adopters. This can be done because this study examines intention to adopt an innovation rather than adoption behavior which has already taken place.

The brokers may be able to provide their clients with detailed knowledge regarding the working of stock options. This may enable the clients to objectively judge the usefulness of stock options rather than be subjected to fears of the unknown, and may, thus, reduce the perceived risk associated with the instrument. We hypothesize, thus, that:

H10: Later adopters of stock options may adopt the instrument earlier if perceived risks are reduced through provision of detailed knowledge regarding the instrument.

Stock brokers may be able to convince investors to leave the investment decisions solely to their professional expertise if these investors trust them enough. These investors may then dispense with the need to try and understand the workings of the instruments themselves. As such, stock brokers as change agents may be able to get people to adopt stock options by abdicating investment decisions with regard to stock options to them. These people, by themselves, will probably not adopt stock options. In contrast to hypothesis 7, we, thus, propose that people who do not make their own investment decisions but trust their brokers, as change agents, to make such decisions on their behalf may adopt stock options. The relevant hypothesis is:

H11: Later adopters may adopt share options earlier by abdicating investment decisions on stock options to their brokers.

It is also possible that later adopters may "gamble" with stock options if they are convinced that others have made large sums of money with the instrument. This is in line with the notion that innovators influence early and late adopters (Robertson 1971). The broker may play a role in bridging the gap between two sets of investors, making visible the success of the innovators and encouraging others to join in the fray. It is, thus, hypothesized that:

H12: Later adopters may adopt stock options earlier if they are convinced of profits to be made with the instruments.


A self-administered questionnaire was used in this study. The questionnaire has four passages and three parts. Passage 1 provides some descriptions on stock options and taps the adoption intention of the respondents. Parts 1 and 2 seek to respectively measure the psychographic and behavioral profiles of the respondents using statements with 7-point Likert scales. Passages 2 to 4 seeks to examine the effects of stock brokers as change agents to the adoption process (Passage 2 is shown in Appendix A). Part 3 tapped the demographic profiles of the respondents.



A convenience sample of a diverse group of people was targeted with distribution of 425 questionnaires through the following channels:

1) Three hundred questionnaires were distributed through four local brokerage houses with the cooperation of the Stock Exchange of Singapore. Although detailed instructions were given to these brokerage houses, they distributed the questionnaires to stock investors without instructions for them to return the questionnaires and without much efforts to collect them back. As a result, only a total of 9 questionnaires were collected from this channel.

2) A total of 60 questionnaires were distributed to MBA students by making personal visits to classes held at the National University of Singapore. A total of 17 questionnaires were collected from this channel.

3) A total of 65 questionnaires were distributed to recent graduates of the BBA program of the National University of Singapore with the instruction to pass them on to family members who invested in the local bourse. A total of 30 questionnaires were collected from this channel.


The final sample consisted of 56 respondents with the following adoption profiles: 16 "immediate" adopters, 10 "in six months" adopters, 12 "in a year" adopters, 15 "beyond three years" adopters and 3 non-adopters. According to definitions provided above, there are 26 early adopters (the "immediate" and "in six months" adopters) and 30 later adopters (the rest of the adopters). A check was made to see if there is any systematic bias with regard to the three groups of respondents in terms of their adoption profiles.No systematic bias was found.

Reliability Tests

Table 1 shows the results of the reliability tests for the adoption intention, psychographic and behavioral measures. All the constructs achieved an alpha value of 0.50 or better (Nunally 1967).

Psychographic and Behavioral Profiles

To examine if the early and later adopters of stock options have significantly different psychographic and behavioral profiles, one-tailed t-tests were carried out. The results of the t-tests are shown in Table 2. Hypotheses 2,4, and 5 were found to be supported at a significance level of .05.

Demographic Profiles

Hypothesis 1 could not be tested as the sample was found to be skewed education-wise with 85% of the respodents having a university degree or better. Hypothesis 3 was tested using one-tailed t-test with measures of personal annual income and annual family income. The hypothesis was supported with a significance level of .01 (see Table 3).





Effects of Change Agents

Hypotheses 10, 11 and 12 involve a change towards a "higher" adoption level in each case, thereby requiring all five adopter cells. As there was an insufficient number of cases in some cells, non-parametric Wilcoxon Matched-Pairs Signed-Ranks tests were carried out to detect shifts in locations for population relative frequency distributions (Sincich 1989). Respondents were examined based on their adoption intentions after reading passage 1 and after reading passages 2, 3 and 4. Only hypothesis 11 was supported at a significance level of .01 (see Table 4).



Since a convenience sample has been used in this study, caution should be exercised in generalizing across larger investor population in Singapore. In particular, it was found that well-educated and high net worth individuals tended to be over-represented in this study. In addition, the reliabilities of some of the measures used in this study have been rather weak.

Although the examination of intention to adopt an innovation represents a novel way to study the phenomenon, there is also the danger of "pro-innovation bias" which arises in situations where individuals perceive that an innovation should be adopted by all members of the social system (Rogers 1983). The sample in this study, being relatively well educated, may perceive stock options in this light.

Implications for Stock Exchange of Singapore

The Stock Exchange of Singapore (SES) has adopted a "soft" approach in planning the launch of stock options in Singapore, with relatively little publicity. The SES has also been aiming at the general investing public and has not done any segmentation. From the results of this study, it would appear that SES should focus their efforts on the higher income investors who are more likely to adopt stock options. The launch should be aimed towards those who have a good understanding of risk-return relationships and the "thinking" investors. This is in line with findings that early adopters would tend to be less risk averse, can handle more abstract details of complex investment instruments, and are relatively less dogmatic. The SES should focus, in its communications with investors and its publicity, on explaining the workings and benefits of the instrument and the costs and risks involved.



The SES seems to be depending on brokers to educate and influence investors to utilise the instrument. From the results of the study, it appears that brokers are not a good change agent. Early adopters were found to have a higher degree of investment autonomy, and they do not have significantly more broker contact. The adoption profile of later adopters do not seem to be potentially altered by the possibilities of abdicating investment decisions to brokers or of brokers attempting to reduce the perceived risks of these investors. It was found, in fact, that successful investors serve as better change agents. The SES, thus, should not depend on brokers to educate and influence investors, but instead, highlight the benefits of the instrument, using case examples and evidences of the experiences of successful adopters of stock options.

Implications for Future Research

This study seeks to examine the adoption of an innovation yet to be introduced into the market. It would be interesting to replicate such a study for another product using a larger sample.

The effects of change agents on the adoption profiles of consumers appear to be another interesting area of research worthy of further investigations.


Blake, Brian, Robert Perloff and Richard Heslin (1970), "Dogmatism and Acceptance of New Products," Journal of Marketing Research, Vol VII (November), 12-18.

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Geok Theng Lau, National University of Singapore
Jude, Kim Chooi Tan, National University of Singapore


AP - Asia Pacific Advances in Consumer Research Volume 1 | 1994

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