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- Title
Rival Precedence and the Dynamics of Technology Adoption: an Empirical Analysis.
- Authors
Hannan, Timothy H.; McDowell, John M.
- Abstract
This study employs information on the adoption of automatic teller machines by banking firms to examine the nature of firm reactions to rival precedence in the adoption process. Using a failure-time estimation procedure, it is found that the adoption of this innovation by rivals increases the conditional probability that a decision to adopt will be made. The effect of spillovers from technology adoption and the interaction of market concentration and rival precedence are also investigated. Finally, the study shows with an example how the estimation procedure may be used to test the underpinnings of diffusion processes. <BR> In this study, we have employed information on the adoption of automatic teller machines by a large sample of banking firms to examine the nature of firm reactions to rival precedence in the adoption process. Using an estimation procedure designed to address such questions, we find that in this empirical context adoption of the innovation by rivals increases the conditional probability that a decision to adopt will be made. We find strong evidence that 'spillovers' from technology adoption, as proxied in this application by state mandatory sharing laws, reduce incentives to adopt new technology on the part of first adopters but reduce by less, or increase, incentives to adopt on the part of following adopters in the same market. We also find evidence suggesting that firms in less concentrated markets react more strongly to rival precedence than do firms in more concentrated markets, and that the relative progressiveness in terms of adoption probabilities evidenced by firms in more concentrated markets is more pronounced in the role of initial adopter than in the role of following adopter. Indeed, point estimates suggest that this role of market concentration may not apply at higher levels of diffusion of the innovation.
- Subjects
BANKING industry automation; AUTOMATED teller machines; TECHNOLOGICAL innovations; MARKET penetration; ECONOMIC models; STRATEGIC planning
- Publication
Economica, 1987, Vol 54, Issue 214, p155
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2554388