Technology Adoption and Network Externalities in Financial Systems: A Spatial-Network Approach
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arXiv
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| Format: | Preprint |
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2026
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| _version_ | 1866909985370275840 |
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| author | Kikuchi, Tatsuru |
| author_facet | Kikuchi, Tatsuru |
| contents | This paper develops a unified framework for analyzing technology adoption in financial networks that incorporates spatial spillovers, network externalities, and their interaction. The framework characterizes adoption dynamics through a master equation whose solution admits a Feynman-Kac representation as expected cumulative adoption pressure along stochastic paths through spatial-network space. From this representation, I derive the Adoption Amplification Factor -- a structural measure of technology leadership that captures the ratio of total system-wide adoption to initial adoption following a localized shock. A Levy jump-diffusion extension with state-dependent jump intensity captures critical mass dynamics: below threshold, adoption evolves through gradual diffusion; above threshold, cascade dynamics accelerate adoption through discrete jumps. Applying the framework to SWIFT gpi adoption among 17 Global Systemically Important Banks, I find strong support for the two-regime characterization. Network-central banks adopt significantly earlier ($ρ= -0.69$, $p = 0.002$), and pre-threshold adopters have significantly higher amplification factors than post-threshold adopters (11.81 versus 7.83, $p = 0.010$). Founding members, representing 29 percent of banks, account for 39 percent of total system amplification -- sufficient to trigger cascade dynamics. Controlling for firm size and network position, CEO age delays adoption by 11-15 days per year. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2601_04246 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Technology Adoption and Network Externalities in Financial Systems: A Spatial-Network Approach Kikuchi, Tatsuru Econometrics Theoretical Economics General Finance Trading and Market Microstructure This paper develops a unified framework for analyzing technology adoption in financial networks that incorporates spatial spillovers, network externalities, and their interaction. The framework characterizes adoption dynamics through a master equation whose solution admits a Feynman-Kac representation as expected cumulative adoption pressure along stochastic paths through spatial-network space. From this representation, I derive the Adoption Amplification Factor -- a structural measure of technology leadership that captures the ratio of total system-wide adoption to initial adoption following a localized shock. A Levy jump-diffusion extension with state-dependent jump intensity captures critical mass dynamics: below threshold, adoption evolves through gradual diffusion; above threshold, cascade dynamics accelerate adoption through discrete jumps. Applying the framework to SWIFT gpi adoption among 17 Global Systemically Important Banks, I find strong support for the two-regime characterization. Network-central banks adopt significantly earlier ($ρ= -0.69$, $p = 0.002$), and pre-threshold adopters have significantly higher amplification factors than post-threshold adopters (11.81 versus 7.83, $p = 0.010$). Founding members, representing 29 percent of banks, account for 39 percent of total system amplification -- sufficient to trigger cascade dynamics. Controlling for firm size and network position, CEO age delays adoption by 11-15 days per year. |
| title | Technology Adoption and Network Externalities in Financial Systems: A Spatial-Network Approach |
| topic | Econometrics Theoretical Economics General Finance Trading and Market Microstructure |
| url | https://arxiv.org/abs/2601.04246 |