Technology Adoption In and Out of Major Urban Areas: When Do Internal Firm Resources Matter Most?

How much do internal firm resources contribute to technology adoption in major urban locations, where the advantages from agglomeration are greatest? The authors address this question in the context of a business's decision to adopt advanced Internet technology. Drawing on a rich data set of adoption decisions by 86,879 U.S. establishments, the authors find that the marginal contribution of internal resources to adoption is greater outside of a major urban area than inside one. Agglomeration is therefore less important for highly capable firms. The authors conclude that firms behave as if resources available in cities are substitutes for both establishment-level and firm-level internal resources.

Digital Dispersion: An Industrial and Geographic Census of Commerical Internet Use

Our study provides the first census of the dispersion of Internet technology to commercial establishments in the United States. We distinguish between participation, that is, use of the Internet because it is necessary for all business (e.g., email and browsing) and enhancement, that is, adoption of Internet technology to enhance computing processes for competitive advantage (e.g., electronic commerce). Employing the Harte Hanks Market Intelligence Survey, we examine adoption of the Internet at 86,879 commercial establishments with 100 or more employees at the end of 2000. Using routine statistical methods, we focus on answering questions about economy-wide outcomes: Which industries had the highest and lowest rates of participation and enhancement? Which cities, states and industries had a typical experience and which did not? We arrive at three conclusions. First, participation and enhancement display contrasting patterns of dispersion. In a majority of industries participation has approached saturation levels, while enhancement occurs at lower rates and with dispersion reflecting long standing industrial differences in use of computing. Second, the creation and use of the Internet does not eliminate the importance of geography. Leading areas are widespread, whereas laggards are more common in smaller urban areas and some rural areas. However, the distribution of industries across geographic regions explains much of the difference in rates of adoption of the Internet in different areas. Third, commercial Internet use is quite dispersed, more so than previous studies show.

The Impact of Location on Consumer Purchases in Electronic Markets

The Internet has been thought of as a technological advancement that will bridge the geographical digital divide and remove the disparities between underserved communities and the rest of the society. In order to examine the existence of underserved communities, we examine how changes in the local supply of goods and services in the offline world changes consumer behavior in technology enabled electronic markets. For example, retail markets for consumer products such as books, music, and videos have traditionally been predominantly local. As local markets increase in size from small towns to large cities, consumers are affected in two ways. First, holding product offerings among retailers fixed, an increase in the size of a location encourages new firm entry that in turn lowers prices and improves service levels. Moreover, larger markets also allow retailers to provide a wider array of product offerings targeted to market segments that would be infeasible in smaller town settings. The emergence of new online retailing channels may act as a substitute for the benefits of urban concentration both by offering lower prices and by providing increased product differentiation for rural consumers. The open question is which of these phenomena are more important: how do consumers use online channels to substitute for offline supply deficiencies, and how does this vary across locations in the United States? We explore this problem using data from Amazon on the top selling books and DVDs for over 8626 unique locations in the US over 10 months between 2005-2006. We show that even controlling for product-specific preferences by location, there are still considerable differences in the responses of locations of different population sizes to price and popularity changes of DVDs and books. These can be attributed to differences in local supply conditions as well as other factors such as demographic characteristics and high speed internet penetration

Standardization and the Effectiveness of Online Advertising

The technological transformation and automation of digital content delivery has revolutionized the media industry. Increased reliance on automation has also led to requirements for standardization of content-delivery formats. This paper examines how the memorability of banner advertising changed with the introduction of new standards regularizing its format. Using data from randomized field tests, we find evidence that for most ads, ad effectiveness falls as the use of standard formats rises. The decline is smaller when a standardized ad appears to be more original (such as ads created by an ad agency). Therefore, a likely explanation is that increased use of a standard format makes it harder for basic ads to distinguish themselves from their competition because the ad format commands less attention

Privacy and Innovation

Information and communication technology now enables firms to collect detailed and potentially intrusive data about their customers both easily and cheaply. This means that privacy concerns are no longer limited to government surveillance and public figures' private lives. The empirical literature on privacy regulation shows that privacy regulation may affect the extent and direction of data-based innovation. We also show that the impact of privacy regulation can be extremely heterogeneous. Therefore, we argue that digitization means that privacy policy is now a part of innovation policy.