Strategic Complements or Substitutes: The Case of Adopting Electronic Medical Records (EMRs) by U.S. Hospitals
55 Pages Posted: 16 Jan 2018 Last revised: 30 Oct 2018
Date Written: September 27, 2018
This paper studies the strategic effect on the choice of EMR vendors. EMR adoption can be strategic complements or substitutes. I find evidence of complements through a simple regression analysis. Then, I construct a dynamic oligopoly model to examine how hospitals evaluate complementarities. A dynamic framework allows for strategic timing incentives that are missing in the static model. On average, the lifetime value of complementarities accounts for 12% of the median sunk cost of implementation. The counterfactual analysis suggests that policies incentivizing the adoption of the dominant local technology improve market coordination and hospital profit.
Keywords: Electronic Medical Records, Strategic Complements, Strategic Substitutes, Dynamic Oligopoly, Technology Adoption
JEL Classification: H51, I11, I13, O33
Suggested Citation: Suggested Citation