Competition, social learning, and technology adoption: The case of mobile money in Peruvian markets

Abstract

Technology adoption by small and microenterprises is poorly understood although their low productivity is a well-known obstacle to economic development. A unique empirical setting, the spread of electronic wallets (mobile money) among vendors in popular markets in Peru, allows us to identify the respective contributions of two key determinants of technology adoption by these firms: competitive pressures and social learning. Using self-collected panel data on vendor behavior in three markets, we estimate the effect on the probability of mobile money adoption of prior adoption by: vendors who are competitors, who are members of a vendor’s social network, or by vendors who are neither competitors nor network members. The literature emphasizes the importance of social learning. Nevertheless, adoption by competing vendors has a larger and more robust effect on own-adoption than adoption by members of a vendor’s social network. The effect persists in multiple robustness tests, including controls for the proximity of vendors. These conclusions suggest that public policy that to encourage technology take-up by small, low-productivity firms could usefully place greater emphasis on competition to complement the existing focus on extension-type services.