The concept of marketing literature, especially innovation diffusion concept, plays a pivotal role in developing EOQ models in the field of inventory management. The integration of marketing parameters, especially the idea of diffusion of new products with the inventory models, makes the models more realistic which is most essential while building the economic ordering policies of the products. Also, because of rapid technological development, the diffusion of technology can also be viewed as an evolutionary process of replacement of an old technology by a new one. Therefore, the effect of technological substitution along with the diffusion of new products must be taken into account while formulating economic ordering policies in an inventory model. In this paper, a mathematical model has been developed for obtaining the Economic Order Quantity (EOQ) in which the demand of the product is assumed to follow an innovation diffusion process as proposed by Fourt and WoodLock (1960). The idea of effect of technological substitution of products has been incorporated in the demand model to make the economic ordering policies more realistic. A numerical example with sensitivity analysis of the optimal solution with respect to different parameters of the system is performed to illustrate the effectiveness of the model. 1. Introduction Technological breakthroughs are continuously being experienced in every field of business management and because of this new, products are constantly entering into the market system. Also, the penetration of new products into the market system generally come in successive generations. This happens due to speedy technological progress because of rapid development of information and communication technology market. The impact of globalization plays one of the pivotal roles to spread awareness about the new products among societies. Also, the changing needs of the society increases the demand of new products which encourage innovations of the products. Therefore, the theory of innovation diffusion is highly desired for attentive management of the new products in order to minimize the total cost and maximize the benefits. To make the business fascinating and demanding, the importance of innovations in business and industry is highly significant. The innovations, especially technological innovations, have made the firms to upgrade their products skillfully for surviving in the market. Diffusion is defined as the process by which an innovation is communicated through certain channels over time among members of a social system (Rogers
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