Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Automated Teller Machines

Posted: 8 Mar 1999

See all articles by Garth Saloner

Garth Saloner

Stanford Graduate School of Business

Andrea Shepard

Independent

Multiple version iconThere are 2 versions of this paper

Abstract

The literature on networks suggests that the value of a network is positively affected by the number of geographically dispersed locations it serves (the "network effect") and the number of its users (the "production scale effect"). We show that as a result a firm's expected time until adoption of technologies with network effects declines in both users and locations. We provide empirical evidence on the adoption of automated teller machines by banks that is consistent with this prediction. Using standard duration models, we find a bank's date of adoption is decreasing in the number of its branches (a proxy for the number of locations and hence for the network effect) and the value of its deposits (a proxy for the number of users and hence for production scale economies). The network effect is the larger of the two effects.

JEL Classification: M00

Suggested Citation

Saloner, Garth and Shepard, Andrea, Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Automated Teller Machines. Available at SSRN: https://ssrn.com/abstract=6013

Garth Saloner (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
(650) 723-1940 (Phone)

Andrea Shepard

Independent

No Address Available

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