Information Technology, Firm Size, and Industrial Concentration

Erik Brynjolfsson, Wang Jin and Xiupeng Wang

No 31065, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Information flows, and thus information technology (IT) are central to the structure of firms and markets. Using data from the U.S. Census Bureau, we provide firm-level evidence that increases in IT intensity are associated with increases in firm size and concentration in both employment and sales. Results from instrumental variables and long-difference models suggest that the effect is likely causal. The effect of IT on size is more pronounced for sales than employment, which leads to a decline in the labor share, consistent with the “scale without mass” theory of digitization. Furthermore, we find that IT provides greater benefits to larger firms by increasing their capability to replicate their operations across establishments, markets, and industries. Our findings provide empirical evidence suggesting that the substantial rise in IT investment is one of the main driving forces for the increase in firm size, decline of labor share, the growth of superstar firms, and increased market concentration in recent years.

JEL-codes: L10 O3 O30 (search for similar items in EconPapers)
Date: 2023-03
New Economics Papers: this item is included in nep-bec, nep-com, nep-des, nep-ict, nep-ind, nep-lma, nep-mac, nep-reg, nep-sbm and nep-tid
Note: PR
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.nber.org/papers/w31065.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:31065

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w31065

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().