Organizational Assimilation of Vertical Standards: An Integrative Model

Vertical standards are complex networked technologies whose assimilation is subject to extensive interorganizational dependence and network effects. Classical theories of diffusion of technological innovation cannot sufficiently explain their assimilation without taking community-level effects into account. This paper introduces a two-level model of organizational assimilation of vertical standards which extends diffusion of innovations theory by including network effects. It combines the most consistently significant firm-level variables from diffusion of innovations with community-level variables subject to network effects. Results of a large-scale empirical test of the model in the insurance, reinsurance, and related financial services industries are presented. The test is the first of its kind in the growing vertical standards literature. The model is strongly supported and confirms the value of integrative approaches employing variables at both the firm and community levels