Market Access and Information Technology Adoption? Historical Evidence from the Telephone in Bavaria

Abstract

Abstract Information technology, like the telephone, influences market access; this paper answers the question about a reverse effect, does market access affect information technology, in particular its adoption? Using the historical case of the introduction of the telephone in Bavaria, I demonstrate with a rank, order and stock effects diffusion model how market access affects the diffusion of local telephone exchanges over towns as well as the rate of adoption of telephone lines within towns. The results of a duration analysis show that market access speeds up the diffusion, a spatial correlation specification demonstrates that this is not just a geographic effect. Controls show that the diffusion was dominated by economic rather than political factors. The rate of adoption within towns is also affected by the adoption of lines in other towns, the results indicate that about 4% of all lines are due to the ability to call outside your local exchange network. Market access is therefore shown to impact the adoption of technology. Please do not cite without permission Email address: [email protected] (Florian Ploeckl) 1 I want to thank Rui Esteves, Bob Allen, Tim Guinnane and James Fenske, the seminar audience in Cologne as well as the conference audience at the 2012 AEA meeting . All errors are of course my ow