Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Teller Machines

The networks literature suggests a network's value increases in the number of locations it serves (the "network effect") and the number of its users (the "production scale effect"). We show this implies a firm's expected time until adoption of a network technology declines in both users and locations. Using data on banks' adoptions of automated teller machines over 1972-1979, we show that adoption delays decline in the number of branches (a proxy for the number of locations and hence the network effect) and the value of deposits (a proxy for number of users and hence for production scale economies) as predicted.