The organizational adoption of information technology (IT) innovations
has been an area of increasing research activity in the last two
decades. While much attention has focused on the relationship
between attributes of the innovation and the adoption decision,
little has been done to study the adopters' reactions to changes
in these attributes over time. An important innovation attribute
is price, which is commonly used as a proxy for adoption cost.
In this paper, we investigate how organizations in the United
States react to mainframe price changes over a period of thirty
years, from 1955 to 1984. A parsimonious diffusion model that
integrates both diffusion and pricing effects is developed. The
model is empirically tested using annual adoption and pricing
data of mainframes. Quality-adjusted price index is used to account
for any changes in quality improvement over time. Our findings
indicate that (1) price is an important factor in the diffusion
process, (2) organizations' reactions to price changes (i.e.,
price elasticity) are not constant, and (3) elasticity dynamics
can serve as an innovation attribute that provides a continuous
characterization of adoption behavior over the life cycle of an
innovation. Implications to IS research and opportunities for
future work are also discussed.
Key words and phrases: , information technology adoption innovation diffusion , price elasticity