The adoption and diffusion of hospital information systems

This dissertation explores the mechanisms that drive the adoption and diffusion of hospital information systems (IS). These analyses, by identifying the conditions under which hospitals adopt or switch information systems, help us to understand how efficiently markets resolve the introduction of new technologies and whether government intervention is appropriate. The analysis begins with the development of a theoretical model of the hospital IS adoption decision. This model incorporates a wide range of potential mechanisms, including technological change, hospital variation in the value of IT, and as well as market and spillover effects. Switching differs from the initial adoption decisions and may be a function of poor initial adoption decisions, non-forecastable technological change that renders technology obsolete, and hospital preference changes. The predictions generated by these models are tested using a novel data set constructed to include the characteristics of hospitals, their markets, and their IS adoption decisions. The initial adoption model is then tested using semi-parametric hazard models. Empirically, I find that rank effects, including hospital scale, system membership, and payer mix drive hospitals' initial adoption decisions. Little evidence is found to support for network externalities, epidemic diffusion, or financial shocks. These findings suggest that demand for technology, not market failure, drives initial adoptions decisions. Likewise, switching decisions appear to be driven by a combination of technological change and changes in hospital preferences. The final analysis examines the role of consolidation as a mechanism to mitigate path-dependent lock-in within the hospital pharmacy management system industry. I utilize exogenous changes in software architecture and the revealed preferences of hospitals to estimate the impact of consolidation on technology lock-in. I find that consolidation hastens the migration of hospitals from outmoded information systems to the viable systems of the acquiring firm. However, the magnitude of the effect is small and most hospitals with outmoded systems fail to switch even five years subsequent to the merger. This suggests that although market mechanisms may serve to mitigate lock-in, the phenomenon still has important and deleterious consequences for technology adoption.