Technological Adoption in Dynamic Environments: The Case of Not-for-Profit and For-Profit Hospitals

The hospital industry has undergone fundamental change in the past ten years and currently faces an increasingly turbulent environment (Ginn, 1990; Zinn et al., 1994; Johnson, 1995; Sumner and Moreland, 1995). In 1983, hospital reimbursement for medicare patients shifted from a "cost-plus" or retrospective basis to prospective reimbursement (Ginn, 1990). Under the prospective payment system (PPS system), hospitals receive a fixed amount to treat a patient with a given diagnosis regardless of actual costs. This shift along with other changes has resulted in an increasingly competitive hospital market. In prior years, hospitals were often seen as noncompetitive, cooperating organizations. However, in the current environment hospitals have taken on much the same characteristics as normal business organizations. In spite of this increasingly competitive market, increases in health care costs have not slowed. The explosion of new "high-tech" medical technology in hospitals has received much of the blame for this escalation in costs (Hamm, 1989; Lamm, 1990; Kirchner, 1991; Johnson, 1995). While the exact amount of escalation in health care costs due to the adoption of medical technological innovations is subject to some debate (Hamm, 1989), there is basic agreement that high-tech medicine is a prime contributor to the rise in costs (Johnson, 1995). Since 1950, health care spending costs have risen from 5% of the gross domestic product (GDP) to 14 percent of GDP. It is projected that by the year 2000 total health care expenditures will equal 17 percent of GDP (Johnson, 1995). Because of medical technology's potential role as a major cause of rising costs the investigation of the factors related to hospital adoption of technological innovations is of particular interest. This article examines the effect of hospital form (not-for-profit versus for-profit) on the adoption of medical technological innovations. To explore this issue, the article is organized as follows. First, the literature on the adoption of technological innovations is reviewed. This is followed by a discussion of how hospital form affects technological adoption. Methodology used in the study is presented, and then the findings are reported and discussed. DETERMINANTS OF THE ADOPTION OF TECHNOLOGICAL INNOVATIONS A considerable amount of past research has dealt with the question of influences on the adoption of innovations in organizations. Before this is discussed, exactly what is meant by a technological innovation should be clarified. An innovation can be defined as an internally generated or purchased device, system, policy, program, process, product or service that is new to the adopting organization (Daft, 1982; Damanpour, 1991). A technological innovation refers specifically to products, services, and production technology (Damanpour, 1991). This article focuses on technological innovations dealing with the products and services offered by an organization. Research on the adoption of innovations by organizations has tended to focus primarily on the role of three groups of variables: individual, organizational and environmental (Damanpour, 1991). Several studies have considered the effect of environmental and individual variables (e.g., Kimberly and Evanisko, 1981; Meyer and Goes, 1988; Gatignon and Robertson, 1989). However, clear consensus has not emerged from these studies as to the effects of these variables. One major study that examined the effect of organizational variables on the adoption of innovations by organizations was a meta-analysis conducted by Damanpour (1991). Based on 23 published studies, Damanpour's meta-analysis of these studies showed that specialization, professionalism, functional differentiation, and environmental scanning are positively related to innovation while formalization, centralization and vertical differentiation are negatively related to innovation. One other organizational variable, size, has consistently been found by researchers to be positively related to innovativeness (Rogers, 1983). …