Technical Support and Service Demand: Evidence from the Cloud

We study how a provider’s technical support influences service demand in a business-tobusiness setting. The provider offers two levels of support, basic and full, reflecting its involvement with the buyer in co-producing the service. Using a unique nano-data set on public cloud infrastructure services consumption by 20,298 firms from March 2009 to April 2012, fixed effects panel data models, and a difference-in-difference identification strategy, we find that buyers who opt for full support consume 137% more IT capacity than those who do not. Moreover, even if they eventually switch from full to basic support, they continue to consume 105% more IT capacity, providing evidence of knowledge transfer. Further, purchase of support is complementary with buyer size: larger firms who adopt full support increase their demand more and retain knowledge better than smaller ones. Finally, we examine the underlying knowledge transfer mechanisms and estimate their economic value.