How Do Industry Features Influence the Role of Location on Internet Adoption?

We provide a framework and evidence to confront two questions: Does the location of an establishment shape its adoption of different complex Internet applications even when controlling for an industry’s features? If location does matter, what features in an industry shape whether Internet adoption follows a pattern consistent with the urban leadership or global village hypotheses? Our findings show that both industry and location play a significant role in explaining the geographic variance in adoption. We also find that industries differ in their sensitivity to location. Information technology–using industries are more sensitive than are information technology–producing industries to the changes in costs and gross benefits affiliated with changes in location size. Moreover, industries with high labor costs and those that are geographically concentrated are more sensitive to changes in gross benefits that occur with increases in location size. Overall, our results provide evidence for an industrial digital divide

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.

Switching Costs, Network Effects, and Networking Equipment: Compatibility and Vendor Choice in the Market for LAN Equipment

This paper examines the importance of compatibility on buyer behavior in the market for LAN equipment over the period 1996 through 1998. I provide evidence that switching costs drive firm establishments to purchase LAN equipment from incumbent vendors. Because LAN equipment is a networked good, incumbency affects vendor choice both when it occurs at the same establishment and/or at other establishments within the same firm. Moreover, compatibility across different product lines within the same vendor also influences vendor choice. This manifests itself in a buyer tendency to purchase routers and switches from the same vendor. These propositions are explored in data on purchases of LAN equipment utilizing open standards such as the Ethernet networking protocol, and represent the first econometric measurement of compatibility effects within products utilizing open standards. These findings show that there are strong economic incentives to offer broad product lines, and provide some rationale for the acquisition strategies of major vendors

The Effect of Electronic Commerce on Geographic Trade and Price Variance in a Business-to-Business Market

Imbalances in supply and demand often cause the price for the same good to vary across geographic locations. Economic theory suggests that if the price differential is greater than the cost of transporting the good between locations, then buyers will shift demand from high-price locations to lowprice locations, while sellers will shift supply from low-price locations to high-price locations. This should make prices more uniform and cause the overall market to adhere more closely to the “law of one price.” However, this assumes that traders have the information necessary to shift their supply/demand in an optimal way. We investigate this using data on over 2 million transactions in the wholesale used vehicle market from 2003 to 2008. This market has traditionally consisted of a set of non-integrated regional markets centered on market facilities located throughout the United States. Supply / demand imbalances and frictions associated with trading across distance created significant geographic price variance for generally equivalent vehicles. During our sample period, the percentage of transactions conducted electronically in this market rose from approximately 0% to approximately 20%. We argue that the electronic channel reduces buyers’ information search costs and show that buyers are more sensitive to price and less sensitive to distance when purchasing via the electronic channel than via the traditional physical channel. This causes buyers to be more likely to shift demand away from a nearby facility where prices are high to a more remote facility where prices are low. We show that these “cross-facility” demand shifts have led to a 25% reduction in geographic price variance during the time frame of our sample. We also show that sellers are reacting to these market shifts by becoming less strategic about vehicle distribution, given that vehicles are increasingly likely to fetch a similar price regardless of where they are sold

The Market is Flat (or is it?) The Effect of Electronic Trading on Buyer Reach, Geographic Transaction Activity and Geographic Price Variance

We analyze how increased use of electronic channels affects geographic price variance by enabling buyers to shift demand across locations. Using data from the wholesale automotive market, we find that buyers use the reach of the electronic channels to shift purchases from highprice to low-price locations. This “arbitrage” reduces the variance of market prices, but not their means. Further, these relationships weaken with distance, due to transportation costs. The study contributes to the literature on how electronic trading affects geographic trade and price dispersion by: a) considering the role of geographic location in price dispersion, b) observing the behavioral mechanism (buyer arbitrage across locations) that leads to lower price dispersion, c) analyzing dispersion when prices are determined by auction rather than fixed price, and d) examining how reduced buyer search costs have led to lower price dispersion throughout the entire market, as opposed to only the online or offline components

FROM WIRES TO PARTNERS: HOW THE INTERNET HAS FOSTERED R&D COLLABORATIONS AMONG FIRMS

This paper studies how IT investments shape the geography of firm innovation. We focus on the role of investments by US firms in basic internet technology on the organization of innovation. We combine establishment-level IT investment data with data on US patenting activity at the MSA level. Our difference-in-difference econometric estimation approach compares the citationweighted count of co-invented patents among two firm locations before basic Internet technology diffused (i.e., 1992) to the count of patents after its diffusion (i.e., 1998). Our results show that when two firm locations adopt Internet technology, the number of cross-location collaborative patents between them increases compared to an otherwise identical pair without Internet technology. We further find that the link between Internet adoption and cross-location patenting is greatest for firm pairs that have previously been successful innovators, have not collaborated before, and which have different research foci

Examining the Relationship Between Reviews and Sales: The Role of Reviewer Identity Disclosure in Electronic Markets

Consumer-generated product reviews have proliferated online, driven by the notion that consumers’ decision to purchase or not purchase a product is based on the positive or negative information about that product they obtain from fellow consumers. Using research on information processing as a foundation, we suggest that in the context of an online community, reviewer disclosure of identity-descriptive information is used by consumers to supplement or replace product information when making purchase decisions and evaluating the helpfulness of online reviews. Using a unique data set based on both chronologically compiled ratings as well as reviewer characteristics for a given set of products and geographical location-based purchasing behavior from Amazon, we provide evidence that community norms are an antecedent to reviewer disclosure of identity-descriptive information. Online community members rate reviews containing identity-descriptive information more positively, and the prevalence of reviewer disclosure of identity information is associated with increases in subsequent online product sales. In addition, we show that shared geographical location increases the relationship between disclosure and product sales, thus highlighting the important role of geography in electronic commerce. Taken together, our results suggest that identity-relevant information about reviewers shapes community members’ judgment of products and reviews. Implications for research on the relationship between online word-of-mouth (WOM) and sales, peer recognition and reputation systems, and conformity to online community norms are discussedNYU, Stern School of Business, IOMS Department, Center for Digital Economy Researc