Electronic Discovery and Electronic Medical Records: Does the Threat of Litigation Affect Firm Decisions to Adopt Technology?

Firms’ decision-making is increasingly leaving an electronic trail. We ask how the threat of litigation affects decisions to adopt technologies that leave more of an electronic trail, like electronic medical records (EMR). On the one hand, firms may embrace a technology that allows them to easily document that their actions were appropriate if they have to defend them in court. On the other hand, firms may fear that the ease of ‘electronic discovery’ may increase their exposure to potentially costly litigation. EMRs allow hospitals to document electronically both patient symptoms and the health providers’ reactions to those symptoms. We find evidence that hospitals are 33 percent less likely to adopt electronic medical records if there are state laws that facilitate the use of electronic records in court. ∗Economics Department, University of Virginia, Charlottesville, VA †MIT Sloan School of Business, MIT, Cambridge, MA. ‡We thank HIMSS Analytics for providing the data used in this study. All errors are our own.