How Do Industry Features Influence the Role of Location on Internet Adoption?

Abstract

We provide a framework and evidence to confront two questions: Does the location of an establishment shape its adoption of different complex Internet applications even when controlling for an industry’s features? If location does matter, what features in an industry shape whether Internet adoption follows a pattern consistent with the urban leadership or global village hypotheses? Our findings show that both industry and location play a significant role in explaining the geographic variance in adoption. We also find that industries differ in their sensitivity to location. Information technology–using industries are more sensitive than are information technology–producing industries to the changes in costs and gross benefits affiliated with changes in location size. Moreover, industries with high labor costs and those that are geographically concentrated are more sensitive to changes in gross benefits that occur with increases in location size. Overall, our results provide evidence for an industrial digital divide.