Working Paper
Innovation and Adoption of Electronic Business Technologies
Kai Sülzle
ifo Institut für Wirtschaftsforschung, München, 2006
Ifo Working Papers No. 38
ifo Institut für Wirtschaftsforschung, München, 2006
Ifo Working Papers No. 38
This paper presents a duopoly model of e-business technology adoption. A leader and a follower benefit from a new e-business technology with uncertain quality depending on its innovation and adoption cost and both firms’ adoption timing. When innovation and adoption require large set-up costs, the leader favors quick adoption by the follower. The follower prefers either late or no adoption. This is due to a delayed first-mover benefit which stems from an innovators’ capability to impose a new technology standard. It is shown that inter-firm adoption subsidies are a viable tool to quicken adoption.
Schlagwörter: Electronic business, adoption, innovation, network effects
JEL Klassifikation: L100,O310