The Competitive Crash in Large-Scale Commercial Computing

50 Pages Posted: 23 Aug 2000

See all articles by Timothy Bresnahan

Timothy Bresnahan

Stanford University - Department of Economics; Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Shane M. Greenstein

Harvard University - Technology & Operations Management Unit; National Bureau of Economic Research (NBER)

Date Written: October 1994

Abstract

We examine the factors underlying buyer demand for large Information Technology solutions in order to understand the competitive crash in large scale commercial computing. We examine individual buyer data from two periods. The first is in the mid 1980's, late in the period of a mature and stable large-systems market. The other period is in the early 1990's, very early in the diffusion of a new, competitive technology, client/server, when many buyers chose to wait for the new technology to mature. We clarify the implications of different theories of the competitive crash and then test them. The most popular theories are far wrong, while the correct view emphasizes the 'internal' adjustment costs to organizations making IT investments. Understanding buyer behavior not only illuminates the competitive crash, but also the factors underlying the slow realization of the social gains to Information Technology in large complex applications more generally.

Suggested Citation

Bresnahan, Timothy F. and Greenstein, Shane M., The Competitive Crash in Large-Scale Commercial Computing (October 1994). NBER Working Paper No. w4901. Available at SSRN: https://ssrn.com/abstract=238129

Timothy F. Bresnahan (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
650-725-5702 (Fax)

Stanford Graduate School of Business ( email )

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Stanford, CA 94305-5015
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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Shane M. Greenstein

Harvard University - Technology & Operations Management Unit ( email )

Boston, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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