To follow the market or the parent system: Evidence from health IT adoption by hospital chains

Abstract

I study how hospital chains consider the tradeoff between internal and external network benefits in technology adoption. I estimate a discrete-choice model that characterizes adoption decisions using a national sample of U.S. hospitals from 2005 to 2014. After instrumenting a vendor's market and system shares, I find affiliated hospitals tend to choose the internally preferred vendor, but experienced adopters also welcome external popular options. Factors affecting the tradeoff include chain size and the need for internal coordination. The stronger incentives for internal integration in health IT adoption among chains might create frictions to sharing information externally.