New technology adoption in US telecommunications: The role of competitive pressures and firm-level inducements

Abstract

In this study we examine the reasons for the differential adoption levels of a new technology, that of electronic switching, across firms in the US telecommunications industry. Using theoretical postulates from the market-structure inducements approach to firm behavior, and the behavioral theory of the firm, we propose that the incentives to adopt a new technology are positively related to the competitive pressures faced by a firm in its micro-market, negatively related to past levels of performance, and positively related to slack availability. Our sample consists of 40 of the largest firms in the industry. We use firm-level data collected for the years 1973, 1978, 1981, 1984, and 1987, and the results indicate strong support for our proposition. Our findings show that, in general, market effects via the mechanism of competitive pressures generated are strong in explaining inter-firm variations in levels of technology adoption in the period since moves to deregulate the industry began; however, the firm-level effects are equally strong, if not stronger, in explaining such variations both in the period leading up to the commencement of deregulatory moves and also immediately thereafter.