Industry Concentration and Information Technology

49 Pages Posted: 2 Oct 2017 Last revised: 26 Jun 2019

See all articles by James E. Bessen

James E. Bessen

Technology & Policy Research Initiative, BU School of Law

Date Written: December 1, 2017

Abstract

Industry concentration has been rising in the US since 1980. Does this signal declining competition and need for a new antitrust policy? Or are other factors causing concentration to rise? This paper explores the role of proprietary information technology (IT), which could increase the productivity of top firms relative to others and raise their market share. Instrumental variable estimates find a strong link between proprietary IT and rising industry concentration, accounting for much of its growth. Moreover, the top four firms in each industry benefit disproportionately. Large investments in proprietary software—$250 billion per year—appear to significantly impact industry structure.

Keywords: information technology, computers, industry concentration, profit margins, antitrust, productivity dispersion

JEL Classification: D4, O33, L10, L4

Suggested Citation

Bessen, James E., Industry Concentration and Information Technology (December 1, 2017). Boston Univ. School of Law, Law and Economics Research Paper No. 17-41. Available at SSRN: https://ssrn.com/abstract=3044730

James E. Bessen (Contact Author)

Technology & Policy Research Initiative, BU School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

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