Impact of network effects and diffusion channels on home computer adoption

Researchers have identified network effects as one of the major drivers for the adoption and diffusion of household technologies. However, the mechanisms and social contexts through which network effects induce technology adoption are unclear. In this paper, we investigate the adoption of household computers using the dataset from the 1989–2003 Computer and Internet Supplement to the Current Population Surveys (CPS). We argue that social influence and learning play a dominant role in inducing the adoption of home computers, and workplaces and schools are important channels through which network effects take place. We find that recent adopters have a stronger impact than distant adopters on future computer adoptions. When the adoption rate is low, channels play a more important role, but their effects diminish as the adoption rate grows. We also find that diffusion channels are more effective for first-time adoption than for repeat purchases. Overall, our study provides important theoretical, policy, and managerial implications.