Network Structure and the Adoption of Technological Innovation

We investigate how innovation adoption is affected by focal firms’ extent of exclusivity with their network partners – the extent to which focal firms work with their network partners whose portfolio of relationships was concentrated with the focal firms relative to their competitors. We argue that greater extent of exclusivity promotes innovation adoption by alleviating the problems of control and coordination, which are endemic to co-operative production networks. Further, we propose three boundary conditions that reduce the positive effects of extent of exclusivity on technology adoption – focal firms’ having greater experience with problems with prior technologies, larger number of network partners, and larger average number of projects with their partners. We test our predictions using data on the U.S. recording industry between 1995 and 2005. This study extends the literature on social networks by introducing a new network property that takes into account how the network of focal firms’ network partners plays an important role in the adoption of innovations by the focal firms.