Performance effects of innovative IT applications over time

Abstract

There is evidence to indicate that the effects of new product and service innovations change over time as a result of learning and competition. However, there have not been any studies of the effects of learning and competition on the impacts of innovative information technology (IT) applications. This paper presents the results of an extensive study of the effects of very early investments in automated teller machines (ATMs) by banks, on market share and overall bank performance. The study spans the period from 1971 to 1984 and includes 2534 banks from across the United States. The results indicate that the impacts of early ATM investments can best be described by exponential and logistic models, indicating that the benefits were very small at first, but increased rapidly after a few years. In addition, the benefits obtained by the earliest adopters were larger than those obtained by the banks that adopted later. These results have important implications for IT investment decisions. The results also suggest that cross-sectional studies, conducted soon after an application is installed, may fail to find benefits even if large benefits are obtained.