How Did Location Affect Adoption of the Commercial Internet? Global Village vs. Urban Leadership

Abstract

We provide a framework and evidence to confront two contradictory yet common assertions: (1) new technology such as the Internet favors businesses in urban areas and (2) the Internet reduces the importance of distance for economic activity. Controlling for other factors, we show that participation in the Internet is more likely in rural areas than in urban areas. This is particularly true for technologies that involve communication across establishments. Nevertheless, talk of the dissolution of cities is premature. Frontier Internet technologies for communication within an establishment appear more often at establishments in urban areas, even with industry controls.

Keywords: Internet, Adoption, Empirical Studies, Agglomeration

JEL Classification: L63, L86, R0