Promoting the adoption of digital technology: Strategic policy insights from a network effects model
Journal article, 2024

This paper examines a dynamic model of digital adoption by firms, incorporating network effects and highlighting the crucial role of government intervention to avoid a low stable equilibrium. The paper presents a strategic policy framework for promoting digital adoption effectively, offering three key insights for policy efforts targeting SMEs. First, there is a risk of ending up at a stable low equilibrium rate of digital adoption despite an initial surge in interest. Sustaining momentum beyond initial promotion efforts is essential. Second, it is critical to make a significant push when the digital adoption rate is approaching critical mass. This tipping point enables continuous, self-sustaining expansion. Third, understanding technology adoption cycles and allocating resources effectively is crucial. Once the adoption rate passes the critical threshold, further adoption occurs without promotional interventions. Resources should then be reallocated to foster the adoption of new technologies or applications, ensuring optimal use of limited resources to drive ongoing innovation and progress. The study also reveals that countries with a larger population of SMEs, due to either a large population or strong entrepreneurial environment, may find it relatively easier to promote digital adoption in this sector.

Critical mass

Digital adoption

Network effects

Promotion policy

Stable and unstable equilibriums

Author

Khuong Vu

National University of Singapore (NUS)

Ibrahim Kholilul Rohman

Universitas Indonesia and Indonesia Financial Group Progress

Erik Bohlin

Chalmers, Technology Management and Economics, Science, Technology and Society

Telecommunications Policy

0308-5961 (ISSN)

102852

Subject Categories

Information Science

Information Systemes, Social aspects

DOI

10.1016/j.telpol.2024.102852

More information

Latest update

9/23/2024