| Abstract: |
This paper studies the diffusion and impact of a cost-saving technological
innovation—Internet banking. Our theory characterizes the process through
which the innovation is adopted sequentially by large and small banks, and how
the adoption affects bank size distribution. Applying the theory to an
empirical study of Internet banking diffusion among banks across 50 U.S.
states, we examine the technological, economic and institutional factors
governing the process. The empirical findings allow us to disentangle the
interrelationship between Internet banking adoption and change in average bank
size, and explain the variation in diffusion rates across geographic regions. |