This study examines the potential applications of the rational expectations hypothesis (REH) and adaptive learning theory in IT investment and adoption decision-making. Despite the fact that rationality is commonly assumed in economic analyses, the REH's assumptions make it a unique theory and allow us to offer new perspectives on IS/IT adoption and investment decision-making. Our application of these theoretical perspectives to the IT adoption context---the first time in the IS literature to our knowledge that REH has been used to examine the mechanism for business value expectations formation---will allow us to treat the investment and adoption issues using a perspective that is based on a longer time horizon. Such settings require managers, as economic agents, to form a set of expectations about the values of various variables related to the business value of IT. Rational expectations and adaptive learning assume that decision-makers are able to utilize all available decision-relevant information efficiently and can learn the true value of a prospective investment over time. We present a number of propositions that characterize this perspective, and discuss some illustrative examples that demonstrate the efficacy of the theoretical perspective that we present to characterize the business value expectations formation process in IT adoption.
This study examines the adoption of electronic bill presentment and payment (EBPP) technology. EBPP continues to grow and will become a multi-billion dollar e-commerce industry. The technology adoption configuration in this context is quite interesting because it involves four stakeholders: billers, bill consolidators, banks, and consumers. Banks and bill consolidators compete to act as an intermediary between billers and consumers. Network externalities play a significant role: the more billers that adopt the technology, the more consumers are willing to use the services. Our analysis is based on the welfare economics concept of finding the socially optimum adoption configuration and the resulting adoption pattern in a market with sponsored technologies. The results show that due to network externalities, billers are more likely to adopt the existing technology early, though the next technology might be superior to the current one. When the higher costs of early adoption are taken into account, the model shows that billers are more willing to wait, ceteris paribus. Our results also show that anticipation of a new and better, but compatible, technology might cause billers to wait, depending on what benefits they expect by adopting early, and how much cost they anticipate to incur upgrading their technology later.