Week 12_Miller and Tucker (2009)_Yaeeun Kim

The study tests how privacy protection affects the diffusion of electronic medical records based on the understanding of the network effect. There is empirical study of the role of network externalities in electronic banking adoption by banks. However, this study is the first to address how network effects and technology adoption decisions are affected by privacy protection. According to the conceptual model of hospital EMR adoption, when net gain from electronic records, defined relative to the alternative technology of paper records, is positive, a hospital will adopt EMRs.

As expected, state privacy protection of hospital medical information inhibits EMR adoption or the network effects of EMR, which is defined as positive externalities experienced by individual hospitals who adopt EMRs when other local hospitals have adopted electronic records. The finding shows that without hospital privacy protection, one hospital’s adoption increase the propensity of other hospitals in the local area to adopt by 7%, but with the privacy protection, no network effects are indicated. This study contributes in quantifying how a hospital’s decision to adopt EMRs is affected by whether state privacy protection restricts a hospital’s ability to disclose information.

The authors suggest for the future study to include the overall welfare effects of either EMRs or privacy laws, which is inferred from a trade-off between privacy protection and EMRs. For the further study, it is demanded to investigate the extent to which privacy protection can be optimized to minimize disruption to the diffusion and use of interdependent technology. I also agree that the positive spillovers from increase of security from protecting confidentiality and evaluations toward the effect of strategy toward adopting EMRs would increase the speed of diffusion.