Artificial Intelligence Policy, Product Competition and Industry Concentration: Evidence from “Superstar” Firms in China

56 Pages Posted: 3 Dec 2024

See all articles by Dongmin Kong

Dongmin Kong

School of Economics, Huazhong University of Science and Technology

jian xu

Hubei University of Economics

Abstract

This paper examines the causal impact of the emerging artificial intelligence (AI) technology on the competitive landscape of firms within a given industry in China. To establish causality, we exploit the exogenous variation in AI investments brought about by the AI policy issued by China's central government. The results of the difference-in-differences estimation indicate that the application of AI technology significantly increases competition between firms in product markets and increases industry concentration among the top 5 firms in the long run. Robustness tests conducted with different specifications support the baseline results. Price competition, big data accumulation and the size effects of the "Top Five" firms provide the potential mechanisms. Our analysis contributes to the understanding of the consequences of AI technology and presents relevant policy implications for the phenomenon of "superstar" firms in developing countries.

Keywords: Artificial intelligence policy, Product competition, Industry concentration, "Superstar" firms, Natural experiment, China

Suggested Citation

Kong, Dongmin and xu, jian, Artificial Intelligence Policy, Product Competition and Industry Concentration: Evidence from “Superstar” Firms in China. Available at SSRN: https://ssrn.com/abstract=5042519 or http://dx.doi.org/10.2139/ssrn.5042519

Dongmin Kong

School of Economics, Huazhong University of Science and Technology ( email )

Bldg. of Econ. School, Louyu Rd. 1037#
HUST, Hongshan Dist.
Wuhan, Hubei 430074
China

Jian Xu (Contact Author)

Hubei University of Economics ( email )

Jiang-xia
Wuchang
Wuhan, 430205
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
30
Abstract Views
108
PlumX Metrics