Identifying Formal and Informal Influence in Technology Adoption with Network Externalities

Firms introducing network technologies ( whose benefits depend on who installs the technology) need to understand which user characteristics confer the greatest network benefits on other potential adopters. To examine which adopter characteristics matter, I use the introduction of a video-messaging technology in an investment bank. I use data on its 2,118 employees, their adoption decisions, and their 2.4 million subsequent calls. The video-messaging technology can also be used to watch TV. Exogenous shocks to the benefits of watching TV are used to identify the causal ( network) externality of one individual user's adoption on others' adoption decisions. I allow this network externality to vary in size with a variety of measures of informal and formal influence. I find that adoption by either managers or workers in boundary spanner positions has a large impact on the adoption decisions of employees who wish to communicate with them. Adoption by ordinary workers has a negligible impact. This suggests that firms should target those who derive their informal influence from occupying key boundary-spanning positions in communication networks, in addition to those with sources of formal influence, when launching a new network technology.