Identifying Formal and Informal Influence in Technology Adoption with Network Externalities

Catherine Tucker (2008) “Identifying Formal and Informal Influence in Technology Adoption with Network Externalities." MANAGEMENT SCIENCE, Vol. 54, No. 12, December 2008, pp. 2024-2038
DOI: 10.1287/mnsc.1080.0897.

Notes by Yi-Nung


Original Abstract

Firms introducing network technologies (whose benefits depend on who installs the technology) need to understand which user characteristics confer the greatest network benefits on other potential adopters. To examine which adopter characteristics matter, I use the introduction of a video-messaging technology in an investment bank. I use data on its 2,118 employees, their adoption decisions, and their 2.4 million subsequent calls.The video-messaging technology can also be used to watch TV.Exogenous shocks to the benefits of watching TV are used to identify the causal (network) externality of one individual user’s adoption on others’ adoption decisions. I allow this network externality to vary in size with a variety of measures of informal and formal influence. I find that adoption by either managers or workers in “boundary spanner" positions has a large impact on the adoption decisions of employees who wish to communicate with them. Adoption by ordinary workers has a negligible impact.This suggests that firms should target those who derive their informal influence from occupying key boundary-spanning positions in communication networks, in addition to those with sources of formal influence, when launching a new network technology.

Cited by:

R. Iyengar, C. Van den Bulte, and T. W. Valente “Opinion Leadership and Social Contagion in New Product Diffusion." Marketing Science, March 1, 2011; 30(2): 195 – 212. [Abstract] [PDF]

S. Aral, L. Muchnik, and A. Sundararajan
Distinguishing influence-based contagion from homophily-driven diffusion in dynamic networks PNAS, December 22, 2009; 106(51): 21544 – 21549.
[Abstract] [Full Text] [PDF]