To Coordinate with or Differentiate from Your Neighbor: The Adoption of Electronic Medical Records by U.S. Hospital Systems
61 Pages Posted: 18 Jun 2018 Last revised: 13 Nov 2019
Date Written: February 2, 2019
This paper seeks to understand the incentives of affiliated hospitals in choosing health information technology (IT) vendors. By adopting a system popular in the local market, hospitals may benefit from complementarities but also worry about losing patients. If benefits outweigh the competitive pressure, the adoption decision is further characterized by the tradeoff between scale economies from system uniformity and external local market complementarities, when the choice of the chain differs from that in the market. I develop and estimate a discrete-choice model to study these dynamics in the adoption decision based on a nationwide sample of hospitals from 2005 to 2013. To control for unobservables at the market and chain levels, I construct instruments, exploiting the spillover related to chains operated in multiple markets. I find that, overall, affiliated hospitals appreciate a vendor's prevalence at both the market and chain levels, with the latter to a greater extent, but their assessment of these two factors varies by different types of hospital chains. The results offer empirical insights on the balance between standardization and adaptation in the strategic management of chains, and have potentially important policy implications to improve the coordination of adopting health IT.
Keywords: Electronic Medical Records, technology adoption, compatibility, coordination, competition, strategic behavior
JEL Classification: I11, I18, L13, L15, O33
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