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Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Automated Teller Machines
... Concerning to this issue, some research examining the use of technology in the production process to increase firm's productivity, has been conducted in the 20th centuries (Abramovitz, 1956;Solow, 1957;Stephen and Prescott's, 1994;Saloner and Shepard, 1995). Then a range of studies have linked technology to firm performance, as measured through wages, firm productivity, growth, and other factors (Acevedo, 2002). ...
... Then a range of studies have linked technology to firm performance, as measured through wages, firm productivity, growth, and other factors (Acevedo, 2002). Many research argue that technology adoption brings down the operational costs (Saloner and Shepard, 1995;Chandrasekhar et al., 2008;Amado et al., 2010), contributes 6 to 81% marginal increase in output (Brynjolfsson and Hitt, 2000;Adewoje et al., 2012;Kabiru et al., 2012), not only improves the efficiency (cost reduction) but also increases the effectiveness (improve performance and make the organization more flexible and better accountability) (Milne, 2006;Sabbaghi and Vaidyanathan, 2008), reduces environmental impact instead of lowering energy 3 IntroductIon costs (Bressler et al.;, and also leads to significant reduction in firm mortality (Sinha and Noble, 2008). ...
... Then a range of studies have linked technology to firm performance, as measured through wages, firm productivity, growth, and other factors (Acevedo, 2002). Recently some studies argue that technology adoption brings down the operational costs (Saloner and Shepard, 1995;Draw Rebb, 2004;Chandrasekhar et al., 2008;Amado et al., 2010), contributes up to 81% of marginal increase in output (Brynjolfsson and Hitt, 2000;Adewoje et al., 2012;Kabiru et al., 2012), not only improve the efficiency (cost reduction) but also increases the effectiveness (improve performance and make the organization more flexible and better accountability) (Milne, 2006;Sabbaghi et al., 2008;Rusli, 2012), reduce environmental impact instead of lowering energy costs (Bressler et al.;, and also leads to significant reduction in firm mortality (Sinha and Noble, 2008). ...
This book investigated the effect of Dynamic capability to technology
adoption for improving firm's performance. The four determinant factors
have been identified are externalities, entrepreneurial leadership, resources readiness, and absorptive capability. Using an empirical research at utility industry this study found that there is positively significance relation among the determinant factors, and the technology adoption is proven for a mediating factor of dynamic capability to the firm performance. It shows the three path ways of technology adoption for improving firm’s performance. However all those ways show that only absorptive capability - as a dynamic capability at firm level - has direct significant effect to technology adoption. Hence the successful technology adoption in firm can be only achieved by excellent absorptive capability with supporting from other three determinant factors. Without such dynamic capability for managing the resource, technology adoption will be less effective and does not enhance firm’s performance. This book also proposes a 3D technology adoption organization matrix explaining eight levels of technology adoption in firm (organization).
... While the potential for network effects to impact consumer demand has long been recognized, empirical attempts to identify and quantify these effects only began in earnest in the 1990s. A rich literature has since developed that documents the presence and impact of demand-based network effects for several goods and services, including computer spreadsheets (Gandal 1994), ATM services (Saloner and Shepard 1995), compact disk players (Gandal, Kende, and Rob 2000), Yellow Pages (Rysman 2004), Personal Digital Assistants (Nair, Chintagunta, and Dubé 2004) and ethanol and flex-fuel vehicles (Shriver 2015). While this literature increasingly focuses on the presence of indirect network effects in platform (or two-sided) markets (e.g. ...
The introduction of a new good (or service) often creates situations in which consumers may choose to consume an extant good, a new good, both goods, or neither. Understanding the evolution and determinants of consumer demand in these situations can be quite important to economic policy formation, and especially so in network industries experiencing the entry of new services. In this study, we draw upon a database of over 180,000 individual household choices of fixed and/or mobile telephone subscriptions over 2003–2010 to improve insight into both the structure and evolution of consumer demand in such portfolio-choice settings. Congruent with our underlying consumer utility model, we find that cellphone service complements household member mobility: Households that are more often “on the go” favor mobile services. We also find the presence of network effects that impact the demand for mobile telephone services. Finally, we find that own- and cross-price elasticities of fixed and mobile telephony services demonstrate marked differences among demographic groups and across income levels.
... Network effects produce greater value than the marginal increase in cost (Jorgenson, 2015). As the value of the product increases faster than the increase in cost, the network effect gives the economy extra surplus, and it is greater than the effects of economies of scale (Saloner & Shepard, 1992). This is because even though the cost increases linearly for each user, the value increases exponentially as the square of connections. ...
This thesis takes motivation in the digital divide between nations to investigate the impact of Information and Communication Technology (ICT) investments on economic growth in poor and rich countries. The difference in ICT impact on growth between countries in different ranges of income per capita could serve a purpose to tell if ICT investments currently are serving to bridge or breach the gap of the digital divide. Hence, this study connects the concept of the digital divide with the basic theory of network effects to make two hypotheses about the impacts of ICT investments on GDP growth both in general and the differences between countries in different ranges of income per capita. The panel data analysis is based on a sample of 129 countries in the period 1991-2022. The empirical analysis has economic (GDP) growth as the dependent variable, while growth in ICT, Non-ICT, labor, and TFP are the independent variables. Growth in employment and growth in total factor productivity are used as control variables in the models. The results in the thesis are measured by a panel VAR model with impulse response functions and Wald Granger Causality test. Additionally, an OLS fixed effects model is analyzed to compare fixed effects in the respective levels of income. The two major findings in the study indicate that ICT growth makes a significant contribution to GDP growth. From the fixed effects the estimates show a significant contribution
from growth ICT to GDP growth in all income groups. The results for the four income groups illustrate that the two lower income groups get less direct economic benefits in terms of GDP growth from the growth in ICT. More surprisingly, the estimates for each income group in the models suggest that upper-middle-income countries get a greater effect from ICT investments on GDP growth than high-income countries.
... Brynjolfsson and Hitt (2000) indicate that Information Technology capital contributes an 81% marginal increase in output, whereas non-Information Technology capital contributes 6%. In another study, Saloner and Shepard (1995) revealed two positive outcomes. Firstly, Information technology brings down the banks' operational costs (the cost advantage). ...
The study's objective is to assess the impact of information technology adaptation, voluntary disclosure, and open innovation on the long-term financial performance of Bangladesh's bank-based financial institutions from 1990 to 2019. The study examined a sample of 30 bank-based financial institutions that are publicly traded on the Dhaka stock exchange, and all relevant data were gathered from publicly available annual reports. The magnitude of the coefficients of IT adaptation, voluntary disclosure, and open innovation were investigated using cross-sectional panel regression, specifically, random effects and fixed effects regression estimation. The Hausman test confirmed that the fixed effects regression model is both robust and efficient in estimating output and testing the proposed hypothesis. The study's findings revealed a positive and statistically significant relationship between IT adaptation and all four measures of sustainable financial performance, implying that the hypothesis that IT adaptation improves a firm's financial performance is validated. Refers to the impact of voluntary disclosure on long-term financial performance; the study established a positive and statistically significant correlation. It implies that voluntary disclosure reduces market information asymmetry, thereby boosting investor confidence and positively affecting the capital market's stock price behavior. Finally, the study discovered that open innovation has a mixed effect on a firm's financial performance. Return on Assets (ROA) and Earnings per Share (EPS) demonstrated a negative and statistically significant relationship, whereas Return on Equity and Tobin's Q demonstrated a positive and statistically significant relationship. In conclusion, it is established that measuring sustainable financial performance is subject to measure selection, and that the impact of target variables varies significantly due to inconclusive measures. However, to ensure financial performance sustainability, it is critical to make prudent strategic investment and disclosure decisions.
... The value and intensity of action by each farmer participating in agricultural activities using ICT rises with increasing level of adoption of ICTs that makes individuals more efficient and cost-effective (Dholakia and Kshetri 2004). Increased participation of individual farmers in ICTs also comes with increased network coverage infrastructure in such locations of households (Saloner and Shepard 1995;Dholakia and Kshetri 2004). Because of high variation in ICTs forms, there is high variation in ICTs' adoption by farmers. ...
It is common knowledge that adopting information and communication technologies -ICTs can significantly enhance agricultural performance. However, their adoption and usage in African agriculture remains disappointing. This study assesses ICTs adoption rates and adoption determinants among Cameroonian farmers. A structured questionnaire was used to collect data from a random sample of 120 farmers in two selected sites highly hit by COVID 19 and an on-going armed conflict in Cameroon’s North West region. Data collected and analysed using SPSS, version 25.0 revealed an overall ICTs adoption rate of 87.5%: 3 times higher than the national average. Experience with ICTs was the lone variable that significantly influenced ICTs adoption at 95% confidence interval (β=0.414, p=0.034). However, the age of the farmer (β=0.122, P=0.073), ICTs usage in last six months (β=-4, 316, p=0.072), farm size (β=1.132, p=0.06), and farmers income (β=-5.22, p=0.072) significantly influenced ICTs adoption only at the 10 percent level. Based on these results we conclude that high ICT adoption rates by farmers in the study is most likely an adaptation strategy to the combined negative lockdown and ghost town effects of COVID 19 and the on-going armed conflict respectively; which create incentives for ICTs adoption. We recommend ICT awareness campaigns, experience-sharing and capacity building as key activities to sustain ICT adoption and eventually stem future dis-adoption rates. Research thrust on the positive impacts of perceived negative events like COVID 19 and armed conflicts especially in Africa is encouraged.
... When potential participation becomes actual, the platform-based innovation ecosystem emerges. Currently, the value of the platform-based innovation ecosystem depends on the generated network effects (Katz & Shapiro, 1994;Saloner & Shepard, 1995;Tiwana, Konsynski and Bush, 2010) that spur it to grow rapidly. ...
The platformization seems to be a demiurgic force, increasingly (re)shaping this millennium and its socio-economic, technological and physical structures, institutions, and human lives. Innovation ecosystems are experiencing this platformization, leading to the rise of platform-based innovation ecosystems. However, the industrial and managerial literature still lacks a shared definition, a consistent theoretical and strategic framework to explain how platform-based innovation ecosystems emerge and replicate from market to market. This conceptual work attempts to fill those gaps by integrating the extant literature on innovation ecosystems in two ways. First, moving from the literature on innovation ecosystems and industry platforms, using systems thinking framing, it explains the platformization of innovation ecosystems through the double lens structure-system. Second, it identifies the holographic strategy as one of the typical patterns featuring platform-based innovation ecosystem envelopment beyond extant market boundaries. These conceptualizations have insightful theoretical, managerial, and policy implications. In particular, the work discusses the ecosystem as a valid unit of analysis for understanding such an unprecedented shaped-by-platform landscape. Then, it describes the growth strategies of the platform-based innovation ecosystem supporting the platform sponsor in mastering multipoint competition. Eventually, the study pinpoints crucial issues for policymakers in regulating the impact that platformization is having on society.
... Brynjolfsson & Hitt (2000) indicate that Information Technology capital contributes an 81% marginal increase in output, whereas non-Information Technology capital contributes 6%. In another study, Saloner & Shepard (1995) revealed two positive outcomes. Firstly, Information technology brings down the banks' operational costs (the cost advantage). ...
The motivation of the study is to gauge the impact of information technology adaptation, voluntary disclosure, and open innovation on sustainable financial performance in bank-based financial institutions in Bangladesh for the period spinning 1990-to 2019. The study considered a sample of 30 bank-based financial institutions enlisted in the Dhaka stock exchange, and all the pertinent data were collected from publically available annual reports. To investigate the coefficients magnitude of IT adaptation, voluntary disclosure, and open innovation, the study employed cross-sectional panel regression particularly, random effects and fixed effects regression estimation. The Hausman test statistic confirmed that the fixed effects regression model is robust and efficient in output estimation and the proposed hypothesis. Study findings revealed that IT adaptation positive and statistically significant tie with all four measure of sustainable financial performance, suggesting the validation of the hypothesis that IT adaptation enhances a firm's financial performance. Refers to voluntary disclosure impact of sustainable financial performance, the study documented positive and statistically significant linkage. It suggests that voluntary disclosure reduces information asymmetry in the market, thus boosting investors' confidence and positively affecting stock price behavior in the capital market. Finally, the impact of open innovation on a firm's financial performance the study disclosed mixed associations between them. The measures of Return of Assets (ROA) and EPS have exposed negative and statistically significant linkage, whereas Return of Equity and Tobin's Q revealed positive and statistically significant bondage. In conclusion, it is established that sustainable financial performance is measured subject to measures selection, and due to inconclusive measures, the impact of target variables varies very often. However, to ensure sustainability in financial performance, it is imperative to have an appropriate strategic investment and disclosure decisions.
... Similarly, they show that information system professionals are more than twice as productive as non-information system professionals. [18] and [19], indicated that the association regarding information and communication technologies and bank performance have two promising effects. ICT can bring down the operational costs of the banks (the cost) advantage). ...
... (This invitation is not transferable and should not be forwarded.) (David 1985, Hossain and Morgan 2009, Hossain et al. 2011, Liebowitz and Margolis 2014. 4 For example, Saloner and Shepard (1995), Gupta et al. (1999), Shankar and Bayus (2003), Nair et al. (2004), Ackerberg and Gowrisankaran (2006), Wilbur (2008), Corts andLederman (2009), Tucker andZhang (2010), Boudreau and Jeppesen (2015), and Chu and Manchanda (2016). 5 Among the 3,314 instances of new listings of products initiated over three months, the authors found that in a control group that received no message regarding installed base that 84% of sellers failed to complete their new listings. ...
A platform might have the potential to bring enormous value to its users. However, without a well-orchestrated launch strategy that coordinates a sufficient number of users onto the platform, this potential will not be realized. The theoretical literature predicts that one approach to coordinating platform take-off is to influence the market’s subjective focal expectations of the future installed base of users. This paper reports on a field experiment investigating the causal role of subjective expectations in the launch of a new platform venture, in which invitations to join a newly launched platform were sent to 16,349 individuals. The invitations included randomized statements regarding the size of the future expected installed base (along with disclosures of the current installed base). I find that simple, subjective, uncommitted, and relatively costless statements broadcasted by the platform with the goal of influencing market expectations were indeed able to influence platform takeoff and overcome an initial chicken-and-egg problem. These broadcasted subjective statements regarding future installed base had a larger influence on adoption rates than did disclosures of the true current installed base during early adoption. However, these subjective statements of expected future installed base ceased to have any effect once the true current installed base grew large. I discuss implication for the promotion, marketing, and evangelism of new platform ventures.
This paper was accepted by Duncan Simester, marketing.
... Second, IT can facilitate transactions among customers within the same network (the network effect) (Farrell and Saloner, 1985;Katz and Shapiro, 1985;Economides and Salop, 1992). Indeed, Saloner and Shepard (1995), using data for United States commercial banks for the period 1971-1979, showed that the concern of network effect is important in the ATM adoption of United States commercial banks and this was also espoused by Milne, 2006. Also, there are some studies agreeing with the positive influence of IT spending to business value. ...
Information and communication technology has for the last two decades become very popular with major commercial banks in Ghana. Lately, most of the rural banks have also computerized and networked their operations and many more gearing up to be computerized. According to ARB Apex Bank, with the support of Bank of Ghana, they will be embarking on nationwide computerization of all the rural banks in Ghana. This research study aims to examine the relationship between the ICT usage and the financial performance of the rural banks from the perspective of four computerized rural banks, namely; Sekyere; Amansie; Bosomtwe; and Atwima Kwanwoma Rural Bank. Perceptions of the management staff of the rural banks, branch managers, staff members and customers were collected using a survey method. In all 212 people were sampled from the four Rural Banks. Interviews were carried out to collect data from key stakeholders in the computerized rural banks. Three types of questionnaires were prepared and distributed among management and head office staff, branch managers and branch staff. Both semi-structured and 5-point likert scale questionnaire were developed. Data analysis was done using linear regression and Analysis of Variance (ANOVA). The analysis revealed that ICT usage (ICT application, ICT literacy and attitude towards ICT) has a positive linear relationship with the financial performance (deposit mobilization, profit and loan recovery) of the rural banks.
... The process is somewhat stereotypical: a technology, usually a generalpurpose technology, is appropriated by banking and financial institutions, it is then adapted and deployed to meet company's and industrial needs. For example, the increase in speed and reach of communication caused by the diffusion of the telegraphs has favoured international operation such as international transfer orders; the application of magnetic strips and microchip from ICT-based sectors to the banking and financial sector signed the linchpin of the nascent systems of modern payment, money transfers (Frazer, 1985) and automated teller machines (Saloner and Shepard, 1992). Following on, the diffusion and application of the internet facilitated the emergence of mobile banking that exploded in the 1990s and 2000s. ...
... The relation between EVs and their charging network belongs a complementary one, like computers and the internet, mobile phones and apps (Saloner & Shepard, 1992;Katz & Shapiro, 1994). The main characteristic of complementary commodities is that consumers must buy both in order to get the maximum benefit. ...
The development of electric vehicles (EVs) cannot separated with the support of charging infrastructures. However, there has always been a paradox between them, especially in the initial phase of EVs development: the low uptake of EVs often hinders the investment enthusiasm of investors for charging infrastructure and vice versa, making them drop into a chicken-egg dilemma. For resolving the problem, a comprehensive planning scheme for EV charging networks is proposed in this paper. In the scheme, the influence mechanism of charging networks along with the developing of EVs is analyzed theoretically first, in which an inclusive analysis framework is proposed; and then around how to solve the current chicken-egg dilemma, a series of propositions and planning models are set forth and built, which not only consider the impact of charging network layout on the EVs’ charging convenience, but also discuss the cost pressure brought by the charging network construction on investors and the subsequent impact on the charging price; last, based on analytic results, aiming to promote the social uptake of EVs effectively, a relevant government subsidy scheme is proposed for charging facilities.
... Banyak studi membuktikan bahwa adopsi teknologi berkontribusi signifikan menaikkan kinerja perusahaan. Adopsi teknologi menurunkan biaya operasional (Saloner & Shepard, 1995;Chandrasekhar et al., 2008;Amado et al., 2010) dan meningkatkan produksi enam sampai 81 persen (Brynjolfsson & Hitt, 2000;Adewoje & Akanbi 2012;Dandago & Usman, 2012). Adopsi teknologi tidak hanya meningkatkan efisiensi berupa penurunan biaya tetapi juga efektivitas berupa peningkatan kinerja, fleksibilitas organisasi dan transparansi (Milne, 2006;Sabbaghi & Vaidyanathan, 2008), mengurangi kerusakan lingkungan di samping meningkatkan efisiensi biaya energi (Bressler et al., 2011), dan juga mengurangi kebangkrutan perusahaan (Sinha & Noble, 2008). ...
Kejayaan bisnis memang banyak bertumpu pada masa lalu, namun bertahan lama oleh karena kekuatan imajinasi yang menyambut masa depan. Di sinilah pusatnya sumber daya inovasi. PLN sedang menabur benih baru di bidang inovasi. Buku ini menjabarkannya dalam berbagai rantai pasok bisnis kelistrikan sehingga penting dibaca oleh para pemangku kepentingan PLN. "Perubahan mengandung risiko, tetapi bukan tidak bisa dikelola. Pertanyaannya, mau atau tidak! Pertanyaan berikutnya, berani atau tidak! Negeri ini ada untuk masa depan. Jangan biarkan negeri ini dikuasai oleh orang-orang yang masih terperangkap pada masa lalu. Jika kepemimpinan dan kapabilitas organisasi hadir di PLN maka tinggal menunggu waktu saja bahwa PLN akan menjadi innovation-driven company atau perusahaan yang berumur panjang yang pada gilirannya terus berkinerja unggul. Hal ini tentunya menjadi harapan seluruh karyawan PLN, pemerintah, dan masyarakat Indonesia."
Buku ini disusun dalam 19 bab menurut logika sistematika inovasi Input, Process, Output, dan Outcome. Buku ini juga menampilkan 19 karya inovasi ketenagalistrikan PLN. Karya-karya unggulan tersebut menampilkan inovasi-inovasi yang sudah terbukti meningkatkan kinerja perusahaan dan memperoleh apresiasi dari para pemangku kepentingan PLN.
... Kay [2013], uses probability theory to replicate the possible adoptions path of Qwerty and conclude that Dvorak would have been inferior in terms of device compatibility given its design and that it would still have lost to Qwerty even if it had been introduced contemporary to it, meaning that there is no better path than adopting Qwerty. Saloner and Shepard [1995] make an empirical analysis of the role of network effects on the adoption of a determined Bank given the number of ATMs/Branches this bank makes available to its customers, confirming the positive relation between networking effects caused by the ATMs spreading and the number of adoptions. Meeks and Swan (2008) discuss the costs and benefits of standardization of accounting methods around the world. ...
For several decades there has been a widely held discussion whether society has been “trapped” into a “bad” choice of standard or, more formally, an inferior equilibrium because of an inefficient -and stochastic- adoption process. This inferior choice hinders society’s benefits from adopting it, in com- parison with an alternative that would have been more beneficial. Often, it may be possible to switch from standards, however, sometimes the chosen standard is “locked-in”, because of the existence of a big pool of adopters and the creation of important technologies around the standard, causing a market failure. I analyze this issue from a Cost-Benefit perspective, and propose a new model where I introduce time as a key variable to argue that, the longer a standard prevails without competitive alternatives, the harder it becomes to change it. Moreover, results tell that a less-efficient standard might still yield an optimal equilibrium given that it spends a long time as the sole alternative. I put special emphasis on arguing that the gains from the past constitute a switching cost into the future, and thus, the criteria for defining the choice of a standard as a market failure changes.
... With the changing society and Machinery, information technology becomes progressively more important than ever and play crucial role in various process including automated teller machine, ticket reservation system, telephone system, the growing network of different industrial system/machines etc. In such channels the performability of each individual unit becomes much valuable (Saloner and Shepard [1]). An ATM machine offer significant advantage to both customer and bank (McAndrews [2]) through its working. ...
An automated teller machine (ATM) is a financial distribution channel (FDC), which allows customers to complete the
basic transactions without visiting the branch representative. Communication in Automatic Teller Machine (ATM) is
completed through three main units namely ATM machine, host computer and bank computer. ATM machine, host
computer and bank computer interacts with each other through networking. The objective of this paper is to improve the
various performance measures of ATM process (ATMP) through mathematical modeling and reliability approach. The
various performance measures of ATMP were obtained with the aid of mathematical modeling. In order to make the
considered system more available/reliable, here authors have considered the bank computer and power supply in standby
mode. Markov process, supplementary variable technique (SVT) and Laplace transform are used to calculate system’s
Availability, Reliability, and MTTF. Critical component of the system identified through sensitivity analysis. For best
understanding, the results are explicated with the help of graphs.
... network externality benefits are Microsoft's MS-DOS operating system and QWERTY keyboard (for additional evidence, see Saloner and Shepard 1995). ...
Network externality is an important consideration in many high-technology product markets. In these markets, consumers’ expectations about the future installed base and the resultant externality benefits play a critical role in their product adoption decisions. The authors investigate the strategic implications of consumer uncertainty regarding network externality and show that a firm can credibly convey private information about future installed base through its new product introduction strategy. The authors initially consider a market in which consumers are homogeneous in their valuation of quality. They show that under complete information the optimal strategy entails provision of full (efficient) quality in the first period itself, providing any upgrade in the second period is suboptimal. However, under asymmetric information about externality, a high-externality firm provides less than full quality initially and then makes up for the quality differential through provision of an upgrade in the second period. Thus, underprovision of introductory quality (i.e., withholding quality) serves as a signal of high externality, and upgrades serve as the mechanism for implementation of the signaling strategy. The authors demonstrate the robustness of this result by extending the model to incorporate consumer heterogeneity in quality valuation. The additional insight here is that signaling entails sequential targeting of segments in addition to sequential provision of quality.
... Various previous studies mention the importance of the branching intensity (branches) in the adoption of Internet banking and pointed that banks with higher branch networks have greater chances to adopt ATM or Internet banking as an impact of a network effect with the intention of future cost cutting in the branch expansions (Corrocher, 2006;Malhotra & Singh, 2007;Saloner & Shepard, 1995). However, some studies argue that banks without a large branch network will adopt Internet banking as an affordable means to expand their customer base (Furst, Lang, & Nolle, 2001, 2002Malhotra & Singh, 2007). ...
In this paper, we try to identify the determinants of adoption of social media, in particular Facebook, among the Indian Scheduled commercial banks. We have employed survival analysis technique that studies the conditional probability of adoption of social media over time. Kaplan-Meier nonparametric survival technique is used to study the nature of social media adoption by the Indian banks. Employing Cox’s proportional hazard regression model, we have tried to assess the effect of explanatory variables on the adoption hazard rate i.e. joining the Facebook. It appears that private sector banks are keen to join the Facebook than public sector banks. The empirical analysis suggests that banks with higher non-interest income, intermediation cost and return on assets has inclined to adopt the technological innovations rapidly. The bank with greater ATM coverage is more likely to join the Facebook. Medium/small sized banks are tend to be faster in joining the Facebook. Banks with higher nonperforming assets are yet to join the Facebook. However, number of branches is not associated with joining the Facebook.
JEL Classification: O31; G21; C41; C34
Keywords: Facebook, Social Media, Banks, Internet Banking, Survival/Duration Analysis, India
Paper type: Research paper
... Barney, 1991;Pfeffer and Salancik, 1978 Resource-based view Adoption depends on a firm's belief that the innovation is a future strategic resource that must be obtained in order to sustain a competitive advantage. Farrell and Saloner, 1985;Farrell and Saloner, 1986;Katz and Shapiro, 1985;Katz and Shapiro, 1986;Saloner and Shepard, 1992 Network externalities Theory The adoption of innovation with network effects depends on the availability of direct and indirect network externalities (for example, the availability of DVDs increases the utility of DVD players). Griliches, 1957;Mansfield, 1961;Mansfield, 1968;Geroski, 2000 Diffusion econometrics Modelling the longer run aspects of technology change and the differences among innovation in the rate of imitation (following a S-curve). ...
Innovation adoption is of utmost importance for company survival. That is why it is important to develop a thorough understanding of this research domain and the themes it encapsulates. Since the early work of Everett Rogers, the adoption of innovation literature has attracted considerable attention and has continued to grow rapidly, resulting in a large but fragmented body of literature. The goal of this study is to provide a coherent overview of the theoretical cornerstones as well as recent research trends in the innovation adoption literature. To this end, we conducted a bibliometric review and performed bibliographic coupling and co-citation analysis. First, based on co-citation analysis, we illustrate that innovation adoption research is built on four theoretical cornerstones including: institutional theory; theory of reasoned action; theory concerning the determinants of adoption, and; diffusion theory. Second, bibliographic coupling was used to assess the current research trends. This review is the first to identify thematic areas in an exhaustive manner revealing five clusters of thematic related publications or “research trends”: determinants of IT adoption; adoption of technological standards; organizational rationales associated with adoption; modelling diffusion, and; adoption of agricultural innovations. We conclude this review with the limitations and future research orientations in the field of innovation adoption.
... Market based perspectives primarily address the question of how network effects drive the emergence of standards (Farell and Saloner, 1985;Katz and Shapiro, 1985;Saloner and Shepard, 1995). Network effects or network externalities, arise if a technology becomes more valuable as the number of users or the availability of complementary products increases (Liebowitz and Margolis, 1994;Suarez, 2004;2005). ...
Research on technology competition spans more than four decades. Firm related factors and macro-environmental factors are crucial regarding the effect of market entry timing on the probability of market lockout against market incumbents. It may be better to enter first or enter later into a market depending on the dynamics of these factors. The paper gives a brief literature overview on platforms and focuses on 4 seminal papers on First Mover Advantage that discuss firm and macro level environmental factors. It integrates them in a single conceptual framework with the intention to understand better their effect on the probability of a technology platform failing in the market which is termed lockout. A system dynamics model is developed and used at first to reproduce the theoretical propositions of the four papers, and then explore them in greater detail.
... The emphasis of this literature is often setting prices to increase the user base, while also potentially increasing prices later once the platform has grown in prominence. The empirical papers in this literature focused on network effects on early network technologies, such as ATMs (Saloner & Shepard, 1992), spreadsheets (Brynjolfsson & Kemerer, 1996;Gandal, 1994), web servers (Gallaugher & Wang, 2002), computer hardware (Greenstein, 1993), and newspaper directories (Rysman, 2004). ...
“Freemium” product strategies—where a free basic version of a product is offered alongside a full “premium” paid version—are often used by companies to attempt to increase the size of their user base and benefit from network effects. However, there is limited empirical evidence of how this strategy impacts company performance. We investigate empirically how the strengthening of network effects on the Apple App Store influenced the revenues generated by market leaders and followers, contrasting firms that use paid only versus freemium strategies. We find that stronger network effects did not on their own lead to greater revenue for market leaders w.r.t. followers. However, in settings where freemium strategies were used, network effects greatly amplified the advantage of leaders over followers.
... The value and intensity of action by each farmer participating in agricultural activities using ICT based MIS rises with increasing level of adoption of ICTs that make individuals more efficient and cost-effective ( Dholakia and Kshetri, 2004). Increased participation of individual farmers in ICT based MIS also comes with increased network coverage infrastructure in such locations of households (Saloner andShepard, 1995, Dholakia andKshetri, 2004). ...
... Market based perspectives primarily address the question of how network effects drive the emergence of standards (Farell and Saloner, 1985;Katz and Shapiro, 1985;Saloner and Shepard, 1995). Network effects or network externalities, arise if a technology becomes more valuable as the number of users or the availability of complementary products increases (Liebowitz and Margolis, 1994;Suarez, 2004;2005). ...
... Moreover, to the best of our knowledge, there exists no empirical study that has examined network effects in the context of a public transit system. Similar to the expansion of a network of automated teller machines examined by Saloner and Shepard (1995) and the adoption of the automated clearing house electronic payment systems examined by Gowrisankaran and Stavins (2004), 1 an expansion of a public transit system benefits not only new users but also existing users. ...
We estimate the network externality of a public transit system by examining the effects of its expansion on the housing market. Our results show that a major expansion of Singapore's Mass Rapid Transit (MRT) system increased the price of apartments within 0.5 km of a pre-expansion station by 1.6% to 2.1% relative to apartments that were further away from a station. Evaluated at the mean housing price, the expansion increased the value of pre-connected apartments by at least S$386 million, which is equivalent to about 8% of the estimated S$5 billion cost of the expansion.
Modern technology markets are characterized by the presence of a network effect, a phenomenon that significantly affects network adoption. While providing the advantage of belonging to a network, network effects can curb the diffusion of alternative technological products, which can negatively influence public welfare. The purpose of this article is to work out a method of a compound impact analysis of direct network effect, critical mass and standardization when assessing changes in the competitive environment on a two-sided software market using the case of operating systems (OS). The theory of network effects constitutes the methodological framework of the study. The research method is an econometric analysis of the impact of the installed base of users, switch of standards and gain of a critical mass of users by applying a basic within model and a difference GMM model. The database consists of monthly country data on website visitors’ activity from the StatCounter web analytics service by desktop, mobile, and tablet devices for the period from 2009 to 2019. The study shows that, due to the saturation effect, markets experience a slowdown in the influence of network effects. The desktop OS market is characterized by the presence of a de facto standard, that is Windows OS, which indicates the monopolization of this segment. OSX, Android, and iOS are industrywide standards. The proposed approach allows analyzing a direct network effect jointly with gain of a critical mass of users and switch of standards.
This paper focuses on exploring the impact of information, communication and technology (ICT) on human resources management (HRM) in selected money deposit banks in Nigeria. The specific objectives guiding the study were to; ascertain the impact of ICT changes on HR function in selected money deposit banks in South East, Nigeria and determine the effect of ICT roles on the changing HR function in selected money deposit banks in South East, Nigeria. The study adopted descriptive survey design. A sample size of 313 was drawn from the population of 1939 at 5% Employee Performance level of significance using Freud and Williams's formula. 313 questionnaires were administered, 294 of them were returned while 19 were not returned, making a responds of rate of 100% and it was designed in two sections. Simple linear regression coefficient statistical tools were used to test the hypotheses. The study reveals that ICT changes has a significant effect on HR function in selected money deposit banks in Nigeria (r =. .845; F= 577.012; t = 24.021; P < 0.05) and ICT roles on the changing HR function in selected money deposit banks in Nigeria (r =.815; F= 456.050; t = 21.355; P < 0.05). The study recommended that the manager of Banks should understand the novel role of ICT as they structure business strategy and articulate the equivalent management strategy on human resources to advance their routine result and act as a strategy companion with top management team of the Banks in South East Nigeria.
This paper reviews selected empirical literature most relevant to network economy. Our selection includes empirical studies assessing network effects and strategies in different sectors and industries. Since network effects-the increase in value of consuming a product if many consumers use the same product-are a feature of many markets and in particular of many high-technology products, we have tried to include a wide variety of empirical literature over the past decades and to make a user-friendly guide for future researches in this important field. Our intention is not to steer future researchers in any particular direction, but to emphasize the need for closer analysis of the consumer interactions and the decision-making process in network industries, as well as better understanding of how network effects operate.
We examine the extent to which network effects on a digital platform are geographically local. Focusing on the fantasy sports market, we find that the size of a county's existing user base on the platform significantly impacts the number of new adopters in that county, while the size of the user base in nearby counties does not. We also find evidence that network effects are heterogenous across income levels. Guided by these results, we demonstrate that the initial distribution of users across counties can significantly influence the growth of the network over time, and draw implications for optimal seeding strategies.
We examine patterns of adoption of a new airtime transfer service over time. We document a strong positive correlation between own adoption and increased usage of the new airtime transfer platform by social neighbours. We examine the possible sources of this correlation by distinguishing between network externalities that extend after adoption and social learning that stops after adoption. We find no correlation between usage by social neighbours and own usage after first adoption. We conclude that social learning about the existence and quality of a new product platform are important mechanisms in its diffusion.
Using staggered entry of two dockless bike‐sharing firms, we study whether the entrant expands or steals the market from the incumbent in 59 cities. Compared with 23 cities without entry, the entry helps the incumbent to serve more trips, make more bike investment, achieve higher revenue per trip, improve bike utilization, and form a wider and more dispersed network. The market‐expanding effect on new users dominates a significant market‐stealing effect on old users. These findings, plus a theory that highlights consumer search and network effects, suggest that a market with positive network effects and multihoming users is not necessarily winner‐takes‐all.
Research Summary
“Freemium” product strategies—where a free basic version of a product is offered alongside a full “premium” paid version—are often used by companies to attempt to increase the size of their user base and benefit from network effects. However, there is limited empirical evidence of how using freemium strategies impacts firm revenues. We empirically investigate how the strengthening of network effects on the Apple App Store influenced product sales of firms using freemium strategies, contrasting the impacts on both market leaders and followers. We find that stronger network effects did not on their own lead to greater revenues for market leaders w.r.t. followers. However, in settings where freemium strategies were used, network effects greatly amplified the advantage of leaders over followers.
Managerial Summary
Freemium strategies are increasingly common as a way for firms to increase the number of users and benefit from network effects. However, there has not been much empirical investigation in this regard, particularly in cases where products using freemium strategies face competition. In this paper, we investigate how a policy by Apple on the App Store that led to stronger network effects, impacted the performance of market leaders and followers depending on whether they used freemium or not. We find that it led to an increase in revenues of leaders over followers (effectively, market dominance) but only when freemium strategies were used. The analysis demonstrates an interplay the between business model and network effects. In addition, it shows how stronger network effects and freemium strategies only benefitted market leaders in our setting.
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The purpose of this research is to explore variation in the influence of networkeffects across competitive settings. Specifically, this study tests for significantdifferences in the impact of a product’s installed base on its growth in an industryinfluenced by network effects, application software. Variation in size-on-growth effectsacross industry segments is conjectured to be a function of the network intensity,or degree of consumer interdependence, of the segments. The results illustratesignificant variation in the magnitude of size-on-growth effects across segments,consistent with the notion of network intensity. Implications for strategy in hightechnologysettings are discussed.
With the development of China’s economy and the acceleration of urbanization, the annual demand for ATMs in China is around 60,000 to 80,000. As of 2018, the number of ATMs in China has exceeded 1.1 million, which has surpassed the USA to become the world’s largest ATM market. The research data in this paper are mainly composed of the point data provided by Gaode Map Platform and Hangzhou Statistical Yearbook data. According to the above data, ArcGIS is used to discuss the rationality of the number of ATM outlets and the reliability of the layout location. The results show that (1) the highest regional density of ATM outlets in Hangzhou is in Xihu District, with 16.87 ATMs per km2, and the lowest in Chun’an County with only 0.04. It shows the unevenness of ATM distribution. (2) Xiacheng District of Hangzhou has the highest number of ATM carrying outlets, with an average of 6.88 ATM outlets per 10,000 people. Yuhang District had the lowest, with 4.2 units per 10,000 people. (3) By analyzing the data of 12 districts and counties in Hangzhou, it is concluded that there is a linear correlation between domain density and population carrying capacity. (4) ATM network distribution in Hangzhou is positively correlated with population density and GDP.
… Newly developed electronic payment systems are expected to substitute for various current payment instruments to lower transaction cost or promote consumers' convenience. While there have been numerous researches on newly developed electronic payment, most of them have just focused on technological and engineering problem or cost analysis. However, consumer's preference on the newly developed payment instruments also acts a crucial role for the successful adoption and diffusion of the newly developed payment instruments. In this paper, by collecting stated multiple choice data, consumer's evaluation on the possible payment instruments including conventional payment instrument such as cash and check has been studied using Multivariate Probit model. We hope that the results are supposed to shed light the direction of R&D investment of electronic payment as well as government policy by supplying the estimates of the status and substitution patterns of the possible payment instruments.
Blockchain technology has received significant attention following the introduction of Bitcoin in 2008. In particular, the financial services industry has sought to capitalize on the underlying technology, known as distributed ledger technology, to generate new products, services, and innovative business models. In this article, through an in-depth investigation of the technology innovation evaluation process, we utilize a grounded theory approach to study 12 financial service organizations. This article is unique in that it explores the technology evaluation process concurrently as decision makers reacted to the potential uses, as opposed to a retrospective view after a technology innovation had been adopted. Evidence suggests that, organizations applied a specific process to determine the value of blockchain that consisted of understand, organize, and test, which collectively helped create the proof-of-value model. Surprisingly, we find that financial service organizations tend to view blockchain innovation as a lower priority due to the lack of a clear path to value. Additionally, financial service organizations consistently leverage industry consortiums to link to external knowledge and help with the decision-making process. Our findings have direct implications to both innovation researchers as well as practitioners seeking to evaluate blockchain technology.
The dawn of Automated Teller Machine (ATM) in conventionality with apex bank policy is swiftly changing the banking transactions in Nigeria. The ATM technology has in no doubt taken banking in Nigeria to a more scientific level for what it should be. The benefits range from receiving cash anywhere ATM is, and at any time of the day and determining the limits of cash an individual should carry at any point in time, thereby reducing crime rate and risk of being attacked. However, any technology advance is usually faced with some challenges of which ATM is not in exclusion. This paper presents a study of the marketing implications of ATM in a cashless economy. It aims at determining the extent to which the automatic teller machine (ATM) has improved the effectiveness, efficiency and service delivery of banks in Nigeria; analysis of how banks and customers have reacted to this new development brought about by advent of ATM is made. The factors affecting the full development of ATM in Nigeria as well as viable solution are clearly stated. The result of the study indicates that ATM has immensely enhanced bank transactions in Nigeria. Although customers and banks were facing some challenges, which is hoped, will be resolved in the nearest future.
Over the past three decades, the banking industry has influenced by significant events such as deregulation, the advent of new technologies, the trend of globalization and financial crises. These events influenced the research areas of the field. This paper provides the study of an emerged timespan view of the development and evolution of banking literature from 1994 to 2017, during our explorations of literature from 1900 onward. It explores the changes, examines the conceptual orientations by the authors, and outlines the future study areas in the banking studies. We created a dataset of 8278 records of banking papers from Web of Science scientific citation indexing service. The results of scientometrics analysis of the articles indicate that banking literature falls into eight different coherent themes of study such as competition, debt, economies of scale, financial crises, credit, saving, banking in transition, and finance. Our findings show that among the eight emerged themes, the two study areas of financial crisis and competition are the youngest ones that will have a significant impact on the opening of future research avenues in banking studies.
Dynamic development of payment cards’ use has been observed during the recent years in all the European Union (EU) Member States, as evidenced by the growth of issued cards, ATM, EFTPOS terminals, and the number and value of payments made through them. The aim of this paper is to assess whether the increasing number of payment cards and terminals really result in higher efficiency. In this case, the efficiency has been measured by means of Data Envelopment Analysis (DEA) using the data of the 27 EU countries, in 2005 and in 2015, namely non-radial and non-oriented Super SBM model under the assumption of a variable return to scale. The principal reasons of changes in efficiencies between 2005 and 2015 have been analyzed by means of the Malmquist index. The results of DEA analysis confirm the assumption that if an increase in a number of devices is not supported by their direct use by clients, it will only have negative impact on the banking sector in a form of efficiency lost.
Unsupervised clustering of firms according to their latent production technology is incorporated in modeling the multiproduct cost function of an industry characterized by simultaneous existence of multiple technologies of production. A Bayesian method using Markov chain Monte Carlo methodology is developed to estimate the multiproduct cost function as a latent class model which is a finite mixture of flexible fixed cost quadratic (FMFFCQ) functions. Firms are stochastically clustered according to the mixing parameter which has a Dirichlet distribution. Hyperparameters, of the prior distributions are expressed in terms of the mean and variance of the prior densities obtained from information years before and decades after regulations or innovations are introduced. The 2 estimated FMFFCQ multiproduct cost function is then utilized to evaluate the degree and direction of overall and product specific economies of scale and scope of banks in Kansas offering agricultural loans. Parameter estimates for the finite mixture model are compared with those of the standard regression model representing one common production technology. KEY WORDS: Data augmentation; Dirichlet mixing parameter; Finite mixture of flexible fixed cost quadratic functions; Markov chain Monte Carlo methods.
Introduction: Since the financial crisis of 2008, the theory of financial innovation has been a focus at a time of re-evaluation and re-conceptualization. However, little has been done to evaluate the current state of research considering the increasing complexity of financial innovation. This paper examines the hypothesis of a general theory that encompasses increasing complexities in the financial innovation process. Methods: The paper begins with an overview of the definitions, the features, and the classification schemes of financial innovation. Additionally, the paper reviews the existing literature on the main objects of study in financial innovation and groups the findings under four main concepts. A conceptual analysis is presented that evaluates current approaches to the study of the financial innovation process and the difficulties inherent in constructing a single general theory. The paper proposes a framework based on a meta-theory of financial innovation as a better approach to understanding the inherent complexities and diversities affecting financial innovations. Discussion: (1) Financial innovations present diversities and complexities that make it infeasible to build a unifying general theory to explain their development. (2) The current state of research on financial innovation theories is limited and requires additional input. (3) A meta-theory that identifies, classifies, and connects theories of development for financial innovations is better suited to explaining the complexity of financial innovation processes.
Objective: Social media has been increasingly used by the banking industries in the developed countries. However, there are limited studies from developing countries on adoption of social media by the banks. Apart from marketing purpose, banks are using the social media to provide various kinds of financial services to its existing customers and to attract the new clients through social network sites like Facebook, Twitter, MySpace, etc. In general, virtual financial space of the social media has been dominated by the Facebook. As on July 31, 2017, India has claimed the first position with 241 million users, ahead of second-ranked United States with 240 million Facebook users. In order to expand their business and improve the productivity, Indian banking industry cannot offer to lose this huge potential clientele base, which is readily available at virtual space. In the environment of cutthroat competition, with the intention to expand their financial services to its existing and potential customers, Indian banks cannot ignore these vibrant Facebook users. In this respect, present study examines the determinants of social media adoption of the 38 Indian commercial banks over the period March 2010 to March 2016. Of these 38 banks, 20 banks are public sector banks.
Methods: Kaplan-Meier nonparametric survival technique has been used to study the nature of social media adoption by the Indian banks. Time to join social media by the Indian public sector banks and private sector banks has been compared by using log-rank χ2 test. Cox’s proportional hazard regression model has been employed to assess the effect of explanatory variables on the adoption hazard rate i.e. joining the Facebook.
Results: As on March 2016, 31 Indian banks has joined the Facebook. Six public sector bank are yet to join the Facebook. Based on the Kaplan-Meier nonparametric survival function, mean time to join the Facebook for the public sector bank is estimated to be 54 months (95% CI: 46 – 62). Similarly, mean time to join the Facebook for the private sector bank is estimated to be 31 months (95% CI: 24 – 39). The median time to join the Facebook has been faster in private sector banks, i.e. 25 months compared to public sector bank with median time of 56 months (log-rank χ2 = 10.17; p=0.001). By using the Cox’s proportional hazard regression model, empirical findings suggest that the size of the bank is negatively affect joining the Facebook by the bank. Whereas, return on assets has been positively associated with joining the Facebook. Private sector banks are joining the Facebook quicker than their counter parts. It seems that private sector banks are leveraging on technological innovations in order to improve their profitability and thereby attracting the new customers. However, number of branches and ATMs are not associated with joining the Facebook by the Indian banks.
Conclusion: The role of the Social media is increasing in the banking industries to manage the long-term customer relationships through continuous interaction with their clients. In general, Facebook is the most widely used social media in India and Indian banking industry cannot offer to lose these vibrant Facebook users. However, there is hardly any study in the extant literature that focuses on the adoption of social media by the Indian banks. The present research uses survival analysis technique of technological diffusion that studies the conditional probability of adoption of social media over time.
By using the Cox’s proportional hazard regression model, empirical findings suggest that the medium size of the banks are tend to faster in joining the Facebook. Whereas, banks with higher non-interest income, intermediation cost and return on assets has inclined to adopt the technological innovations rapidly. The relationship between type of bank (i.e. private sector bank) and joining the Facebook is positive and statistically significant. In general, banks with the higher nonperforming assets are yet to adopt the Facebook. However, number of branches and ATMs are not associated with joining the Facebook by the Indian banks.
JEL Classification: O31; G21; C41; C34
Keywords: Social Media, Facebook, Indian Banks, Survival/Duration Analysis
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