Does Competition Lead to Agglomeration or Dispersion in EMR Vendor Decisions?

We examine hospital Electronic Medical Record (EMR) vendor adoption patterns and how they relate to hospital market structure. As in many network technology adoption decisions, hospitals face countervailing incentives to coordinate or differentiate in their choice of vendors. We find evidence of substantial agglomeration on EMR vendors, which increases as hospital markets become more competitive. These findings suggest that incentives to coordinate dominate incentives to differentiate overall, and the relative balance grows stronger in favor of coordination as markets become more competitive. Our findings also have important implications regarding antitrust policy. A potential downside of hospital consolidation—increased obstacles in information sharing due to vendor differentiation—should be taken into account in evaluation of hospital mergers.