Impact of Interorganizational Relationships on Technology Diffusion: An Agent-Based Simulation Modeling Approach

Abstract

Interorganizational relationships are an integral part of an organization's decision-making process. The reason is that an organization's decision affects and is affected by the decision of its partners, particularly in the context of technology adoption and diffusion. Therefore, it is important to explore the role of this social network of organizations in shaping the process of technology diffusion. We conduct a series of experiments using the agent-based simulation modeling technique to identify strategically located firms in a network that can significantly influence the process of software diffusion. Our findings suggest that: 1) structural location of organizations does significantly influence the process of diffusion; and 2) the criteria for identifying strategically located firms depend on contextual factors, such as network topology, network density, and interoperability costs. To illustrate the practical use of these results, we propose a “network-aware” pricing strategy that takes advantage of information regarding organizational social networks. We illustrate that contrary to prevalent practice in the enterprise software market, where firms are generally targeted on the basis of their size, network-aware pricing has the potential to facilitate the development of a more effective market penetration strategy.