IDEAS home Printed from https://ideas.repec.org/a/eee/respol/v41y2012i2p401-413.html
   My bibliography  Save this article

Production technologies and financial performance: The effect of uneven diffusion among competitors

Author

Listed:
  • Fuentelsaz, Lucio
  • Gómez, Jaime
  • Palomas, Sergio

Abstract

We explore the impact of a production technology on financial performance from the perspectives of technology diffusion and competitive strategy theory. We analyse how diffusion at firm and market levels influences the returns from the technology. We suggest that firm heterogeneity in the level of technology use leads to competitive advantages for relatively intensive adopters. We empirically test our propositions through the analysis of the diffusion of the Automated Teller Machine among Spanish savings banks between 1986 and 2004. Our results show that it is not the absolute but the relative level of use that drives the impact of the technology on profitability. Furthermore, as the technology is more intensively deployed in the market, the profitability of every firm decreases. Interestingly, in our empirical setting, this negative effect eventually leads to an aggregate negative impact on the profitability of the savings banks.

Suggested Citation

  • Fuentelsaz, Lucio & Gómez, Jaime & Palomas, Sergio, 2012. "Production technologies and financial performance: The effect of uneven diffusion among competitors," Research Policy, Elsevier, vol. 41(2), pages 401-413.
  • Handle: RePEc:eee:respol:v:41:y:2012:i:2:p:401-413
    DOI: 10.1016/j.respol.2011.09.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0048733311001740
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.respol.2011.09.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Giuliana Battisti & Heinz Hollenstein & Paul Stoneman & Martin Woerter, 2007. "Inter And Intra Firm Diffusion Of Ict In The United Kingdom (Uk) And Switzerland (Ch) An Internationally Comparative Study Based On Firm-Level Data," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 16(8), pages 669-687.
    2. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87, World Scientific Publishing Co. Pte. Ltd..
    3. Garth Saloner & Andrea Shepard, 1995. "Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Teller Machines," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 479-501, Autumn.
    4. Sunil Sharma, 1992. "Behind the Diffusion Curve: An Analysis of ATM Adoption," UCLA Economics Working Papers 686, UCLA Department of Economics.
    5. Hollenstein, Heinz & Woerter, Martin, 2008. "Inter- and intra-firm diffusion of technology: The example of E-commerce: An analysis based on Swiss firm-level data," Research Policy, Elsevier, vol. 37(3), pages 545-564, April.
    6. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 322-347, April.
    7. Georg Götz, 1999. "Monopolistic Competition and the Diffusion of New Technology," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 679-693, Winter.
    8. Battisti, Giuliana & Stoneman, Paul, 2003. "Inter- and intra-firm effects in the diffusion of new process technology," Research Policy, Elsevier, vol. 32(9), pages 1641-1655, October.
    9. Dolata, Ulrich, 2009. "Technological innovations and sectoral change: Transformative capacity, adaptability, patterns of change: An analytical framework," Research Policy, Elsevier, vol. 38(6), pages 1066-1076, July.
    10. Battisti, Giuliana & Canepa, Alessandra & Stoneman, Paul, 2009. "e-Business usage across and within firms in the UK: profitability, externalities and policy," Research Policy, Elsevier, vol. 38(1), pages 133-143, February.
    11. Berger, Allen N. & Demsetz, Rebecca S. & Strahan, Philip E., 1999. "The consolidation of the financial services industry: Causes, consequences, and implications for the future," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 135-194, February.
    12. Suarez, Fernando F., 2004. "Battles for technological dominance: an integrative framework," Research Policy, Elsevier, vol. 33(2), pages 271-286, March.
    13. Fariborz Damanpour & Richard M. Walker & Claudia N. Avellaneda, 2009. "Combinative Effects of Innovation Types and Organizational Performance: A Longitudinal Study of Service Organizations," Journal of Management Studies, Wiley Blackwell, vol. 46(4), pages 650-675, June.
    14. Sarv Devaraj & Rajiv Kohli, 2003. "Performance Impacts of Information Technology: Is Actual Usage the Missing Link?," Management Science, INFORMS, vol. 49(3), pages 273-289, March.
    15. Brian L. Dos Santos & Ken Peffers, 1995. "Rewards to Investors in Innovative Information Technology Applications: First Movers and Early Followers in ATMs," Organization Science, INFORMS, vol. 6(3), pages 241-259, June.
    16. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, Decembrie.
    17. Michael E. Porter, 1991. "Towards a dynamic theory of strategy," Strategic Management Journal, Wiley Blackwell, vol. 12(S2), pages 95-117, December.
    18. Philippe Aghion & Christopher Harris & Peter Howitt & John Vickers, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(3), pages 467-492.
    19. Murali D. R. Chari & Sarv Devaraj & Parthiban David, 2008. "Research Note--The Impact of Information Technology Investments and Diversification Strategies on Firm Performance," Management Science, INFORMS, vol. 54(1), pages 224-234, January.
    20. Arnoud W. A. Boot & Matej Marinç, 2008. "The evolving landscape of banking," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 17(6), pages 1173-1203, December.
    21. Hannan, Timothy H & McDowell, John M, 1990. "The Impact of Technology Adoption on Market Structure," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 164-168, February.
    22. Massoud Karshenas & Paul L. Stoneman, 1993. "Rank, Stock, Order, and Epidemic Effects in the Diffusion of New Process Technologies: An Empirical Model," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 503-528, Winter.
    23. Edwin Mansfield, 1963. "The Speed of Response of Firms to New Techniques," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 77(2), pages 290-311.
    24. Katerina Simons & Joanna Stavins, 1998. "Has antitrust policy in banking become obsolete?," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 13-26.
    25. Adrian R Pagan & Anthony D Hall, 1983. "Diagnostic tests as residual analysis," Published Paper Series 1983-1, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    26. Myron L. Kwast & Martha Starr-McCluer & John D. Wolken, 1997. "Market definition and the analysis of antitrust in banking," Finance and Economics Discussion Series 1997-52, Board of Governors of the Federal Reserve System (U.S.).
    27. Hannan, Timothy H & McDowell, John M, 1987. "Rival Precedence and the Dynamics of Technology Adoption: An Empirical Analysis," Economica, London School of Economics and Political Science, vol. 54(214), pages 155-171, May.
    28. Schilling, Melissa, 1999. "Winning the standards race: : Building installed base and the availability of complementary goods," European Management Journal, Elsevier, vol. 17(3), pages 265-274, June.
    29. Dean M. Schroeder, 1990. "A dynamic perspective on the impact of process innovation upon competitive strategies," Strategic Management Journal, Wiley Blackwell, vol. 11(1), pages 25-41, January.
    30. Stoneman, Paul & Kwon, Myung Joong, 1996. "Technology Adoption and Firm Profitability," Economic Journal, Royal Economic Society, vol. 106(437), pages 952-962, July.
    31. Goddard, John & Molyneux, Philip & Wilson, John O.S. & Tavakoli, Manouche, 2007. "European banking: An overview," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 1911-1935, July.
    32. Battisti, Giuliana & Stoneman, Paul, 2005. "The intra-firm diffusion of new process technologies," International Journal of Industrial Organization, Elsevier, vol. 23(1-2), pages 1-22, February.
    33. Timothy H. Hannan & John M. McDowell, 1984. "The Determinants of Technology Adoption: The Case of the Banking Firm," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 328-335, Autumn.
    34. Fuentelsaz, Lucio & Gomez, Jaime & Polo, Yolanda, 2003. "Intrafirm diffusion of new technologies: an empirical application," Research Policy, Elsevier, vol. 32(4), pages 533-551, April.
    35. Chari, Murali D.R. & Devaraj, Sarv & David, Parthiban, 2007. "International diversification and firm performance: Role of information technology investments," Journal of World Business, Elsevier, vol. 42(2), pages 184-197, June.
    36. Ricart, Joan E. & Adegbesan, Tunji, 2007. "Appropriating value from external technology: Absorptive capacity dimensions and innovation strategy," IESE Research Papers D/669, IESE Business School.
    37. William P. Barnett & Henrich R. Greve & Douglas Y. Park, 1994. "An Evolutionary Model of Organizational Performance," Strategic Management Journal, Wiley Blackwell, vol. 15(S1), pages 11-28, December.
    38. Arora, Ashish & Fosfuri, Andrea & Gambardella, Alfonso, 2001. "Markets for Technology and Their Implications for Corporate Strategy," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 10(2), pages 419-451, June.
    39. David B. Humphrey, 1994. "Delivering deposit services: ATMs versus branches," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 59-81.
    40. Richard A. Bettis & Michael A. Hitt, 1995. "The new competitive landscape," Strategic Management Journal, Wiley Blackwell, vol. 16(S1), pages 7-19.
    41. Hoppe, Heidrun C., 2000. "Second-mover advantages in the strategic adoption of new technology under uncertainty," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 315-338, February.
    42. Fuentelsaz, Lucio & Gómez, Jaime & Palomas, Sergio, 2009. "The effects of new technologies on productivity: An intrafirm diffusion-based assessment," Research Policy, Elsevier, vol. 38(7), pages 1172-1180, September.
    43. Henrich R. Greve, 2009. "Bigger and safer: the diffusion of competitive advantage," Strategic Management Journal, Wiley Blackwell, vol. 30(1), pages 1-23, January.
    44. Battisti, Giuliana & Iona, Alfonsina, 2009. "The intra-firm diffusion of complementary innovations: Evidence from the adoption of management practices by British establishments," Research Policy, Elsevier, vol. 38(8), pages 1326-1339, October.
    45. Sinan Aral & Peter Weill, 2007. "IT Assets, Organizational Capabilities, and Firm Performance: How Resource Allocations and Organizational Differences Explain Performance Variation," Organization Science, INFORMS, vol. 18(5), pages 763-780, October.
    46. Lucio Fuentelsaz & Jaime Gómez, "undated". "Multipoint Competition, Mutual Forbearance and Entry into Geographic Markets," Studies on the Spanish Economy 127, FEDEA.
    47. Peter W. Roberts & Raphael Amit, 2003. "The Dynamics of Innovative Activity and Competitive Advantage: The Case of Australian Retail Banking, 1981 to 1995," Organization Science, INFORMS, vol. 14(2), pages 107-122, April.
    48. Mookherjee, Dilip & Ray, Debraj, 1991. "On the competitive pressure created by the diffusion of innovations," Journal of Economic Theory, Elsevier, vol. 54(1), pages 124-147, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Serge Ky & Clovis Rugemintwari & Alain Sauviat, 2019. "Is fintech good for bank performance? The case of mobile money in the East African Community," Working Papers hal-02155077, HAL.
    2. Fuentelsaz, Lucio & Gómez, Jaime & Palomas, Sergio, 2016. "Interdependences in the intrafirm diffusion of technological innovations: Confronting the rational and social accounts of diffusion," Research Policy, Elsevier, vol. 45(5), pages 951-963.
    3. Jaime Gómez & Raquel Orcos & Sergio Palomas, 2014. "The evolving patterns of competition after deregulation: the relevance of institutional and operational factors as determinants of rivalry," Journal of Evolutionary Economics, Springer, vol. 24(4), pages 905-933, September.
    4. Jamel Chouaibi, 2021. "Innovation and Financial Performance in Manufacturing Companies: an Empirical Study Tunisian," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(4), pages 1870-1890, December.
    5. Jaime Gómez & Idana Salazar & Pilar Vargas, 2017. "Does Information Technology Improve Open Innovation Performance? An Examination of Manufacturers in Spain," Information Systems Research, INFORMS, vol. 28(3), pages 661-675, September.
    6. Shampa Paul & Kaushalesh Lal, 2021. "Technology Intensity and Employment in the Indian Economy," Arthaniti: Journal of Economic Theory and Practice, , vol. 20(1), pages 34-52, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fuentelsaz, Lucio & Gómez, Jaime & Palomas, Sergio, 2016. "Interdependences in the intrafirm diffusion of technological innovations: Confronting the rational and social accounts of diffusion," Research Policy, Elsevier, vol. 45(5), pages 951-963.
    2. Fuentelsaz, Lucio & Gómez, Jaime & Palomas, Sergio, 2009. "The effects of new technologies on productivity: An intrafirm diffusion-based assessment," Research Policy, Elsevier, vol. 38(7), pages 1172-1180, September.
    3. Scott, Susan V. & Van Reenen, John & Zachariadis, Markos, 2017. "The long-term effect of digital innovation on bank performance: An empirical study of SWIFT adoption in financial services," Research Policy, Elsevier, vol. 46(5), pages 984-1004.
    4. Waters, James, 2015. "Determinants of initial technology adoption and intensification: evidence from Latin America and the Caribbean," MPRA Paper 61473, University Library of Munich, Germany.
    5. Waters, James, 2013. "The influence of information sources on inter- and intra-firm diffusion: evidence from UK farming," MPRA Paper 50955, University Library of Munich, Germany.
    6. Juan M. Gallego & Luis H. Gutiérrez & Sang H. Lee, 2015. "A firm-level analysis of ICT adoption in an emerging economy: evidence from the Colombian manufacturing industries," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 24(1), pages 191-221.
    7. Gomez, Jaime & Vargas, Pilar, 2009. "The effect of financial constraints, absorptive capacity and complementarities on the adoption of multiple process technologies," Research Policy, Elsevier, vol. 38(1), pages 106-119, February.
    8. Strong, Derek Ryan, 2017. "The Early Diffusion of Smart Meters in the US Electric Power Industry," Thesis Commons 7zprk, Center for Open Science.
    9. James Waters, 2017. "Determinants of initial technology adoption and intensification: evidence from Latin America and the Caribbean," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 26(4), pages 334-352, May.
    10. Stoneman, Paul & Battisti, Giuliana, 2010. "The Diffusion of New Technology," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 733-760, Elsevier.
    11. Spyros Arvanitis & Marius Ley, 2013. "Factors Determining the Adoption of Energy-Saving Technologies in Swiss Firms: An Analysis Based on Micro Data," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(3), pages 389-417, March.
    12. Gómez, Jaime & Vargas, Pilar, 2012. "Intangible resources and technology adoption in manufacturing firms," Research Policy, Elsevier, vol. 41(9), pages 1607-1619.
    13. Ben Aoun - Peltier, Leila & Vicente Cuervo, Maria Rosalia, 2012. "E-commerce diffusion: exploring the determinants of the adoption and extent of usage at firm-level," MPRA Paper 49333, University Library of Munich, Germany.
    14. Spyros Arvanitis & Marius Christian Ley, 2010. "Factors Determining the Adoption of Energy-saving Technologies in Swiss Firms," KOF Working papers 10-257, KOF Swiss Economic Institute, ETH Zurich.
    15. John Goddard & Donal McKillop & John Wilson, 2009. "Which Credit Unions are Acquired?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 36(2), pages 231-252, December.
    16. Xiang Bi & Connor Mullally, 2021. "Does Peer Adoption Increase the Diffusion of Pollution Prevention Practices?," Land Economics, University of Wisconsin Press, vol. 97(1), pages 224-245.
    17. Hernández-Murillo, Rubén & Llobet, Gerard & Fuentes, Roberto, 2010. "Strategic online banking adoption," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1650-1663, July.
    18. repec:zbw:bofism:2006_038 is not listed on IDEAS
    19. Dahlke, Johannes & Beck, Mathias & Kinne, Jan & Lenz, David & Dehghan, Robert & Wörter, Martin & Ebersberger, Bernd, 2024. "Epidemic effects in the diffusion of emerging digital technologies: evidence from artificial intelligence adoption," Research Policy, Elsevier, vol. 53(2).
    20. Snellman, Heli, 2006. "Automated teller machine network market structure and cash usage," Scientific Monographs, Bank of Finland, number 2006_038.
    21. Nicoletta Corrocher & Roberto Fontana, 2008. "Expectations, network effects and timing of technology adoption: some empirical evidence from a sample of SMEs in Italy," Small Business Economics, Springer, vol. 31(4), pages 425-441, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:respol:v:41:y:2012:i:2:p:401-413. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/respol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.