This study is about the adoption of Web-based transactional banking (WBTB). A theoretical model integrating the efficiency-choice and neo-institutional perspectives was developed and tested using data from the population of all banks and thrifts in the United States. Does the Internet level the competitive landscape for small firms? Our results show that larger banking and thrift institutions have a greater propensity to adopt WBTB. In addition, adoption is also influenced by prior adopters who are incorporated within the same state, are of the same firm size, but not those of the same institution type. This study has important implications for theory and practice. It empirically validates the importance of including both a neo-institutional and efficiency- choice perspective in any theory of IT innovation adoption. It also provides empirical evidence on the diffusion and adoption of Internet-based innovation that will be helpful to the practice of Internet managers and policy makers.