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Heterogeneity and the dynamics of technology adoption

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  • Stephen Ryan
  • Catherine Tucker

Abstract

We estimate the demand for a videocalling technology in the presence of both network effects and heterogeneity. Using a unique dataset from a large multinational firm, we pose and estimate a fully dynamic model of technology adoption. We propose a novel identification strategy based on post-adoption technology usage to disentangle equilibrium beliefs concerning the evolution of the network from observed and unobserved heterogeneity in technology adoption costs and use benefits. We find that employees have significant heterogeneity in both adoption costs and network benefits, and have preferences for diverse networks. Using our estimates, we evaluate a number of counterfactual adoption policies, and find that a policy of strategically targeting the right subtype for initial adoption can lead to a faster-growing and larger network than a policy of uncoordinated or diffuse adoption.
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  • Stephen Ryan & Catherine Tucker, 2012. "Heterogeneity and the dynamics of technology adoption," Quantitative Marketing and Economics (QME), Springer, vol. 10(1), pages 63-109, March.
    • Handle: RePEc:kap:qmktec:v:10:y:2012:i:1:p:63-109
    DOI: 10.1007/s11129-011-9109-0
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    More about this item

    Keywords

    Technology adoption; Videoconferencing; Dynamics; Network effects; Unobserved heterogeneity; C10; L10; L86; M3; O32;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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