The Impact of Cloud Computing and AI on Industry Dynamics and Concentration

Yao Lu, Gordon Phillips and Jia Yang

No 32811, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the rise of cloud computing and AI in China and their impacts on industry dynamics after the shock to the cost of Internet-based computing power and services. We find that cloud computing is associated with an increase in firm entry, exit and the likelihood of M&A in industries that depend more on cloud infrastructure. Conversely, AI adoption has no impact on entry but reduces the likelihood of exit and M&A. Firm size plays a crucial role in these dynamics: cloud computing increases exit rates across all firms, while larger firms benefit from AI, experiencing reduced exit rates. Cloud computing decreases industry concentration but AI increases concentration. On the financing side, firms exposed to cloud computing increase equity and venture capital financing, while only large firms increase equity financing when exposed to AI.

JEL-codes: D25 G3 G34 L20 L23 L25 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-ain, nep-bec, nep-cfn, nep-cna, nep-com, nep-ent, nep-ict, nep-ind, nep-lma, nep-reg, nep-sbm and nep-tid
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