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Information Technology and Industry Concentration

43 Pages Posted: 2 Oct 2017  

James E. Bessen

Boston University - School of Law; Research on Innovation

Date Written: September 28, 2017

Abstract

Industry concentration has been rising in the US since 1980. Why? This paper explores the role of proprietary information technology systems (IT), which could increase industry concentration by raising the productivity of top firms relative to others. Using instrumental variable estimates, this paper finds that industry IT system use is strongly associated with the level and growth of industry concentration. The paper also finds that IT system use is associated with greater plant size, greater labor productivity, and greater operating margins for the top four firms in each industry compared to the rest. Successful IT systems appear to play a major role in the recent increases in industry concentration and in profit margins, moreso than a general decline in competition.

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

JEL Classification: D4, O33, L10, L4

Suggested Citation

Bessen, James E., Information Technology and Industry Concentration (September 28, 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)

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Research on Innovation ( email )

202 High Head Rd.
Harpswell, ME 04079
United States
617-531-2092 (Phone)

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