Electronic Discovery and the Adoption of Information Technology

After firms adopt electronic information and communication technologies, their decision-making leaves a trail of electronic information that may be more extensive and accessible than a paper trail. We ask how the expected costs of litigation affect decisions to adopt technologies, such as electronic medical records (EMRs), which leave more of an electronic trail. EMRs allow hospitals to document electronically both patient symptoms and health providers' reactions to those symptoms and may improve the quality of care that makes the net impact of their adoption on expected litigation costs ambiguous. This article studies the impact of state rules that facilitate the use of electronic records in court. We find evidence that hospitals are one-third less likely to adopt EMRs after these rules are enacted. (JEL K41, O33, I12).