This paper explores the adoption choice of electronic medical records by U.S. hospitals, which could exhibit strategic complements or substitutes. I find complementarities in adoption through a reducedform analysis with instruments for unobserved market characteristics. I further develop a dynamic oligopoly model to allow for strategic timing incentives that are missing in the static model. Adopting a dominant local vendor could increase perperiod profits from adoption by 9.2% over choosing a marginal vendor. A counterfactual analysis suggests an incentive program rewarding coordination, not just adoption, is more effective in achieving interoperability, especially before the widespread adoption of the technology.

At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w26455.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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