ICT and the changing nature of competition: Evidence from information intensive industries in Italy

Despite the increasing interest over the transformations induced by ICT on industry structure and competition, there is still not a unified view on the effects of ICT on industrial change. On the one hand, ICT is expected to bring more competition, to reduce entry barriers and to leave more opportunities for small entrepreneurial firms. On the other hand, there is evidence of the increased market concentration favoured by ICT. The changing nature of competition has been so far studied more at firm level and more of the empirical evidence is for highly information intensive economies like the US. This paper tries to bridge this gap analysing 209 industries in Italy between 2002 and 2011. Our results show a significant effect of ICT on industry dynamics. Firstly, we find that information intensive industries showed a higher productivity, a higher market concentration and a greater profit dispersion compared to their counterparts, thus extending related studies that identify mechanisms for ICTenabled value creation in US. Secondly, we do not find phenomena of hi-growth of SMEs in information intensive industries as a consequence of the limited capability of Italian SMEs to use ICT to start hi-growth entrepreneurial ventures, differently from what happens in other countries.