The Value of Information in Competitive Markets: Evidence from Small and Medium Enterprises

93 Pages Posted: 18 Mar 2022 Last revised: 4 Jun 2023

See all articles by Jose E. Galdon-Sanchez

Jose E. Galdon-Sanchez

Universidad Publica de Navarra ; IZA

Ricard Gil

Queen's University (Canada) - Smith School of Business

Guillermo Uriz Uharte

SCPSA; Universidad Pública de Navarra

Date Written: June 2, 2023

Abstract

In this paper, we empirically investigate how the performance and decision-making of small and medium-sized enterprises (SMEs) change when gaining access to strategically valuable market information. To do so, we evaluate the impact of an unprecedented information service diffused at zero cost by a large European bank among its SME customers. Adopting firms had monthly access to reports the bank provided with rich information about their own firm’s clientele portfolio and all their competitors. Using a first-differences estimator, we find adoption is associated with a 4.5% increase in establishment revenue, whereas instrumental variable estimation results show that adoption causally increases revenue by 9%. The main mechanism driving our result is that the new information prompted adopting establishments to target existing, yet unexploited, business opportunities. More specifically, we find adopting establishments increase their sales to underrepresented gender-age customer groups in their customer portfolio prior to adoption. Our evidence also suggests that adopting establishments shift sales from weekly peak to off-peak times. Because adopting SMEs obtain substantial returns from access to information at zero monetary cost, our evidence suggests managerial inattention and cognitive costs must be two main factors deterring small firms from acquiring and analyzing market information.

Keywords: information, competitive markets, data sharing, small and medium enterprises

JEL Classification: G20, L20, L80, M15, O32, O33

Suggested Citation

Galdon-Sanchez, Jose E. and Gil, Ricard and Uriz Uharte, Guillermo, The Value of Information in Competitive Markets: Evidence from Small and Medium Enterprises (June 2, 2023). Available at SSRN: https://ssrn.com/abstract=4022675 or http://dx.doi.org/10.2139/ssrn.4022675

Jose E. Galdon-Sanchez

Universidad Publica de Navarra ( email )

Department of Economics
Campus de Arrosadia
Pamplona, Navarra 31006
Spain
+34 948 16 9338 (Phone)
+34 948 16 97 21 (Fax)

HOME PAGE: http://www.econ.unavarra.es/~galdon/

IZA

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=1494

Ricard Gil (Contact Author)

Queen's University (Canada) - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Universidad Pública de Navarra

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