Strategic Complements or Substitutes: The Case of Adopting Electronic Medical Records (EMRs) by U.S. Hospitals
60 Pages Posted: 16 Jan 2018 Last revised: 28 Feb 2019
Date Written: January 25, 2019
This paper studies the strategic effect on the choice of EMR vendors. EMR adoption exhibits strategic complements or substitutes. I find evidence of strategic complements through a simple regression analysis. To evaluate complementarities, I develop a dynamic oligopoly model allowing 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 an incentive program rewarding coordination, not just adoption, is more effective in achieving interoperability, especially before the widespread adoption of the technology.
Keywords: Electronic Medical Records, HITECH Act, strategic complements, strategic substitutes, dynamic oligopoly, technology adoption
JEL Classification: I11, I18, L13, L15, O33
Suggested Citation: Suggested Citation