Strategic Complements or Substitutes? The Case of Adopting Health Information Technology by U.S. Hospitals

72 Pages Posted: 16 Jan 2018 Last revised: 18 Sep 2019

See all articles by Jianjing Lin

Jianjing Lin

Rensselaer Polytechnic Institute (RPI) - Department of Economics

Date Written: January 25, 2019

Abstract

This paper explores the adoption choice of electronic medical records by U.S hospitals, which could exhibit strategic complements or substitutes. I find complementarities in adoption through a reduced-form analysis with instruments for the unobserved market characteristics. I further develop a dynamic oligopoly model to allow for strategic timing incentives that are missing in the static model. The lifetime value of complementarities accounts for 12% of the median sunk cost of implementation. A 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: Strategic complements/substitutes, technology adoption, HITECH Act, structural estimation

JEL Classification: I11, I18, L13, L15, O33

Suggested Citation

Lin, Jianjing, Strategic Complements or Substitutes? The Case of Adopting Health Information Technology by U.S. Hospitals (January 25, 2019). Available at SSRN: https://ssrn.com/abstract=3099638 or http://dx.doi.org/10.2139/ssrn.3099638

Jianjing Lin (Contact Author)

Rensselaer Polytechnic Institute (RPI) - Department of Economics ( email )

Troy, NY 12180
United States
5182762016 (Phone)

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