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

Abstract

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

Lin, Jianjing, Strategic Complements or Substitutes: The Case of Adopting Electronic Medical Records (EMRs) by U.S. Hospitals (September 27, 2018). Available at SSRN: https://ssrn.com/abstract=3099638 or http://dx.doi.org/10.2139/ssrn.3099638

Jianjing Lin (Contact Author)

Department of Economics ( email )

Troy, NY 12180
United States
5182762016 (Phone)

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