The meaning of hierarchy effect as an empirical regularity in the spatial diffusion of entrepreneurial innovation has been ambiguous, and its spatial signification has been imperfect in the past. In the case of profit-motivated polynuclear innovation a hierarchical diffusion viewed from the aspect of spatial process seems to occur through the spatial market division. Therefore in this paper, taking an example of the diffusion of electric light company (E.L. Company for short) in Fukushima Prefecture, the author examined this point (Fig. 1 & 3).<br>On the whole E.L. Company, which first opened in Fukushima in 1895, spread from the city to the town and from the town to the village, showing the hierarchical diffusion pattern (Fig. 4 & 6). Particularly this time lag of diffusion by the city, town and village-category may be accounted for by the concentration of entrepreneurs on specific places (Table 2). Moreover it also results from the fact that the motive of establishment in the city and town is different from that in the village; that is, while the motive in the former is to make a profit, that in the latter is to raise the life and culture level. So the author investigated the diffusion process of E.L. Company by the city, town and village-category.<br>The municipal cities in Fukushima Prefecture were only Aizu-Wakamatsu and Fukushima. The reasons why the opening of E.L. Company in Fukushima was earlier than that in Aizu-Wakamatsu whose population was the largest are inferred as follows. (1) The information potential in Fukushima is high by a close relationship to the Keihin district through the export of habutae-silk. (2) Fukushima is in close vicinity to Sendai where the first E.L. Company in Tohoku district opened in 1894. (3) While the economic world in Aizu-Wakamatsu where the traditional industry was located and suffered a blow of the Meiji Restoration War was stagnant, that in Fukushima which was suddenly rising backed by the silk-reeling industry was more enterprising.<br>For the diffusion process of E.L. Company in the town and village level, the following result was obtained by step wise forward discriminant analysis and multiple regression analysis. The potential adopters in the town level are those where population and textile industry are agglomerated, and whose possibility to be included within the service area of E.L. Company in Fukushima is low (Table 3 & 4). Among towns fulfilling these conditions, the more population, information potential, and possibility to get wide service areas they had, the earlier the openings of E.L. Companies were (Table 5). E.L. Companies thus opened in the city and town extended their service areas toward the neighboring villages where some industrial activities existed within the limit of electric transmission (Table 6 & 7 and Fig. 9). In this regard a significant market division principle restricted by distance definitely operated. Though the market division by E.L. Companies proceeded, those in the city and town didn't lastly include all the villages into their service areas, consciously excluding some small villages (This point is suggested by the fact that from Table 8 E.L. Companies tended to open in smaller villages). In other words it means that the market division principle based on the opportunity distribution such as population size replaced the above-mentioned principle restricted by distance.<br>But even among the villages not graced with the electric light, if hydraulic power place exists in the vicinity and some industrial activities are located, there is a possibility for E.L. Company to open (Table 8 & 9). Soon after World War I among the villages fulfilling the above conditions, the less possibility to be included within the service area of E.L. Company in Fukushima, the more industrial activities and the higher income level they had, the earlier the openings of E.L. Companies were (Table 10).