Competition and multilevel technology adoption: a dynamic analysis of electronic medical records adoption in U.S. hospitals.

What factors will enterprises consider when deciding whether to adopt digital technology or not? In order to promote the application of an important technology, the government often subsidizes enterprises. So, how will these enterprises be effected by the subsidy policy? When studying the above questions, competitive effects and strategic interaction that may exist during the adoption process of new technologies maybe overlooked by enterprises. If enterprises adopt new technologies strategically because of competition, their behavior could be significantly different from the scenario in which they make independent decisions. Analyzing and examining the competitive effects when enterprises adopt new technologies is crucial for understanding the enterprises strategies, evaluating and making the policy.

On this basis, WANG Yanfei, assistant professor from the Department of Trade and Economics of Renmin Business School, independently wrote a paper and published it online in International Economic Review, the top international journal of economics. This is the first time that faculty and students of Renmin University of China have published papers in this journal as independent authors.

The article studies the adoption of electronic medical records (EMR) technologies in U.S. hospitals. Through investing in EMR technologies, hospitals attempt to gain a competitive advantage by attracting more local physicians and patients. However, the marginal benefits of EMR adoption may decline with increasing neighboring adopters in the market because of intensifying competition. The article firstly examines that there are competitive effects in the process adoption of EMR technologies via reduced-from regressions. On this basis, the article develops and estimates a dynamic oligopoly structural model that takes hospitals’ strategic interactions into account, and quantifies the importance of competitive effects in the decision of hospital EMR adoption. At last, the article performs the counterfactual experiments to examine whether the U.S. government’s subsidy policy enacted in 2009 promotes the EMR adoption.

The article finds evidence for the presence of competitive effects in EMR adoption: for hospitals that have not adopted EMR, their probabilities of adopting EMR decrease with more neighboring adopters in the market. Competitive effects prompt hospitals to engage in preemption, thus reducing the probabilities of adoption by neighboring hospitals. In terms of encouraging EMR adoption, the government should consider the market and hospital heterogeneity and competitive effects when making the subsidy policy.

The article also has implications for the adoption of digital technologies in Chinese hospitals. First, to promote the application of digital technologies, we should establish the unified standards, improve the information exchange and cooperation among different hospitals, promote the network externalities, thus offsetting the influence of competitive effects. Second, it’s essential for the government to capture hospital and region heterogeneity when formulating the subsidy policy in the adoption of digital technologies.

For more details, please refer to https://onlinelibrary.wiley.com/doi/10.1111/iere.12586.