Adoption of e-commerce technology: Do network and learning externalities matter?

This report is the output of a two-month research project commissioned by the Department of Trade & Industry (DTI) for exploring the factors that may influence eCommerce adoption in the UK, using matched database of business microdata at the Office for National Statistics. The aim of the research was to investigate: • the feasibility of constructing an extensive panel from ONS linked data, • the adoption of eCommerce as a function of various firm characteristics, learning and network externalities, • the different econometric techniques to estimate eCommerce adoption. The main findings of the study are: • The level of adoption of Information and Telecommunication Technologies (ITT) for accessing the Web, and implementing " eCommerce for Buying " and " eCommerce for Selling " increases over the time in the UK. This holds for most of the manufacturing sectors, for both domestic and foreign firms and for firms of different size classes. Unsurprisingly a much higher proportion of businesses are adopting the technologies for simply accessing the Web (e-mail and information gathering), rather than for eCommerce. • The main factors influencing a firm's decision to adopt these technologies are: the price of ITT, firm size, network externalities, learning externalities. • At the same time there are different types of unobserved factors, at the regional, temporal and firm level, which influence a firm's decision to adopt the technologies. When we control for these, the impact of some of the above factors is dramatically affected. This implies the need for further research to quantify some of these 'unobserved' effects. Finally the use of information on the history of the firm enables us to estimate models that are 'superior' to the ones normally employed in the literature, which are typically based on information from a single year (i.e. the year in which the survey was conducted). However in the current study the results of the two models are very similar in most respects.