Opening the "Black Box" of Network Externalities in Network Adoption

Recent theoretical work suggests that network externalities are a determinant of network adoption. However, few empirical studies have reported the impact of network externalities on the adoption of networks. As a result, little is known about the extent to which network externalities may influence...

Full description

Saved in:
Bibliographic Details
Published in:Information systems research 2000-03, Vol.11 (1), p.61-82
Main Authors: Kauffman, Robert J, McAndrews, James, Wang, Yu-Ming
Format: Article
Language:English
Subjects:
ATMs
Bank automation
Bank markets
Banking industry
Banking services
Banks
Communications networks
Computer networks
Consumers
Decision making
duration models
economic analysis
Economic externalities
Economic models
Economic theory
Electronic banking
Externality
Federal Reserve Bank
financial services
hazard function
Hypotheses
Information storage and retrieval systems
Innovations
Internet banking
IT investment
Modeling
network externalities
network goods
Opportunity costs
Predatory pricing
Product acceptance
Retail banking
Software
Studies
Technological change
Technology
Technology adoption
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Recent theoretical work suggests that network externalities are a determinant of network adoption. However, few empirical studies have reported the impact of network externalities on the adoption of networks. As a result, little is known about the extent to which network externalities may influence network adoption and diffusion. Using electronic banking as a context and an econometric technique called hazard modeling , this research examines empirically the impact of network externalities and other influences that combine to determine network membership. The results support the network externalities hypothesis . We find that banks in markets that can generate a larger effective network size and a higher level of externalities tend to adopt early, while the size of a bank's own branch network (a proxy for the opportunity cost of adoption)decreases the probability of early adoption.
ISSN:1047-7047
1526-5536
DOI:10.1287/isre.11.1.61.11783