Originally published: September 23, 2010
Last updated: September 23, 2010 - 12:48pm
A new analysis by Shane Greenstein, an economist at Northwestern University who has studied adoption of broadband Internet, sheds some light on why - aside from investor wariness - the rapid global adoption of the Internet since 2001 hasn't succeeded in re-inflating the economy.
Greenstein asserts in an essay originally published in IEEE Spectrum that, despite the speculative bubble, the first wave of Internet companies did in fact create a great deal of never-before-seen value. Greenstein notes that, for every Pets.com, there was also an Amazon or eBay--tech giants that have fundamentally re-shaped commerce into the present day. Keep in mind that the first bubble was over before more than 10% of Americans even had broadband Internet. Given that it's ten years later and broadband Internet now reaches six times as many U.S. households, where is the growth that we would have expected from both the furious pace of IT R&D and such widespread deployment? Greenstein's answer is simple: the second wave of Internet businesses haven't led to overall growth because, unlike the first wave, they are simply cannibalizing the business of off-line retailers.
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