IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/4048.html
   My bibliography  Save this paper

Adoption of Technologies With Network Effects: An Empirical Examination of the Adoption of Automated Teller Machines

Author

Listed:
  • Garth Saloner
  • Andrea Shepard

Abstract

The literature on networks suggests that the value of a network is positively affected by the number of geographically dispersed locations it serves (the "network effect") and the number of its users (the "production scale effect"). We show that as a result a firm's expected time until adoption of technologies with network effects declines in both users and locations. We provide empirical evidence on the adoption of automated teller machines by banks that is consistent with this prediction. Using standard duration models, we find that a bank's date of adoption is decreasing in the number of its branches (a proxy for the number of locations and hence for the network effect) and the value of its deposits (a proxy for number of users and hence for production scale economies). The network effect is the larger of the two effects.

Suggested Citation

  • Garth Saloner & Andrea Shepard, 1992. "Adoption of Technologies With Network Effects: An Empirical Examination of the Adoption of Automated Teller Machines," NBER Working Papers 4048, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4048
    Note: IO
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w4048.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
    2. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
    3. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
    4. Nancy L. Rose & Paul L. Joskow, 1990. "The Diffusion of New Technologies: Evidence from the Electric Utility Industry," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 354-373, Autumn.
    5. Joseph Farrell & Garth Saloner, 1985. "Installed Base and Compatibility With Implications for Product Preannouncements," Working papers 385, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-679, June.
    7. 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.
    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. Honohan, Patrick*Vittas, Dimitri, 1996. "Bank regulation and the network paradigm : policy implications for developing and transition economies," Policy Research Working Paper Series 1631, The World Bank.
    2. Shi, Lefeng & Hao, Ying & Lv, Shengnan & Cipcigan, Liana & Liang, Jun, 2021. "A comprehensive charging network planning scheme for promoting EV charging infrastructure considering the Chicken-Eggs dilemma," Research in Transportation Economics, Elsevier, vol. 88(C).
    3. Domowitz, Ian, 1995. "Electronic derivatives exchanges: Implicit mergers, network externalities, and standardization," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(2), pages 163-175.
    4. Howell, Bronwyn & Obren, Mark, 2002. "Broadband Diffusion: Lags from Vintage Capital, Learning by Doing, Information Barriers and Network Effects," Working Paper Series 3896, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    5. JAMES J. McANDREWS, 1999. "E‐Money And Payment System Risks," Contemporary Economic Policy, Western Economic Association International, vol. 17(3), pages 348-357, July.

    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. De Bijl, Paul W. J. & Goyal, Sanjeev, 1995. "Technological change in markets with network externalities," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 307-325, September.
    2. Robert J. Kauffman & James McAndrews & Yu-Ming Wang, 2000. "Opening the “Black Box” of Network Externalities in Network Adoption," Information Systems Research, INFORMS, vol. 11(1), pages 61-82, March.
    3. Michihiro, Kandori & Rob, Rafael, 1998. "Bandwagon Effects and Long Run Technology Choice," Games and Economic Behavior, Elsevier, vol. 22(1), pages 30-60, January.
    4. Vanberg, Margit A., 2005. "Network Externalities and Interconnection Incentives," ZEW Discussion Papers 05-80, ZEW - Leibniz Centre for European Economic Research.
    5. Pekka Sääskilahti, 2016. "Buying Decision Coordination and Monopoly Pricing of Network Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(2), pages 313-333, April.
    6. Casadesus-Masanell, Ramon & Ghemawat, Pankaj, 2003. "Dynamic mixed duopoly: A model motivated by Linux vs. Windows," IESE Research Papers D/519, IESE Business School.
    7. Kenneth Arrow, 2000. "Increasing returns: historiographic issues and path dependence," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 7(2), pages 171-180.
    8. A Kimms, 2003. "Costing communication standards in information systems using a minimum cut approach," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 54(4), pages 426-431, April.
    9. Rui Baptista, 1999. "The Diffusion of Process Innovations: A Selective Review," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(1), pages 107-129.
    10. Scott, Peter, 2001. "Path Dependence and Britain's "Coal Wagon Problem"," Explorations in Economic History, Elsevier, vol. 38(3), pages 366-385, July.
    11. Antonio Estache & Marco Manacorda & Tommaso M. Valletti, 2002. "Telecommunications Reform, Access Regulation, and Internet Adoption in Latin America," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 153-218, January.
    12. Lars-Hendrik Röller & Christian Wey, 2003. "Merger Control in the New Economy," Netnomics, Springer, vol. 5(1), pages 5-20, May.
    13. Floortje Alkemade & Carolina Castaldi, 2005. "Strategies for the Diffusion of Innovations on Social Networks," Computational Economics, Springer;Society for Computational Economics, vol. 25(1), pages 3-23, February.
    14. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    15. David, Paul A. & Rothwell, Geoffrey S., 1996. "Standardization, diversity and learning: Strategies for the coevolution of technology and industrial capacity," International Journal of Industrial Organization, Elsevier, vol. 14(2), pages 181-201.
    16. Suzi Kerr & Richard G. Newell, 2003. "Policy‐Induced Technology Adoption: Evidence from the U.S. Lead Phasedown," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 317-343, September.
    17. Egon Franck, 2006. "Beiträge der Neuen Institutionenökonomik zum Innovationsmanagement," Schmalenbach Journal of Business Research, Springer, vol. 58(54), pages 58-85, January.
    18. Greaker Mads & Heggedal Tom-Reiel, 2010. "Lock-In and the Transition to Hydrogen Cars: Should Governments Intervene?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-30, May.
    19. Alexei Parakhonyak & Nick Vikander, 2019. "Optimal Sales Schemes for Network Goods," Management Science, INFORMS, vol. 65(2), pages 819-841, February.
    20. Christian Wey, 1999. "Compatibility Investments in Duopoly with Demand Side Spillovers under Different Degrees of Cooperation," CIG Working Papers FS IV 99-02, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG), revised Aug 1999.

    More about this item

    Statistics

    Access and download statistics

    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:nbr:nberwo:4048. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    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.