TY - JOUR
T1 - Impact of Competition on Innovations of IT Industry
T2 - An Empirical Investigation
AU - Chen, Tao
AU - Kenneth Cheng, Hsing
AU - Jin, Yong
AU - Li, Shengli
AU - Qiu, Liangfei
N1 - Funding Information:
We thank Vladimir Zwass (EIC, JMIS), three anonymous reviewers, and the participants at the seminar at Peking University for helpful discussions and useful suggestions. The work described in this paper was substantially supported by the funding for Projects of Strategic Importance of The Hong Kong Polytechnic University (Project Code: 1-ZE2D). This work is also supported by the National Natural Science Foundation of China (71972004 71731009 72061127002 2018WZDXM020 71832011 71732006 72032006). Cheng acknowledges generous research support of John B. Higdon Eminent Scholar Chair. All errors are our own.
Publisher Copyright:
© 2021 Taylor & Francis Group, LLC.
PY - 2021/5
Y1 - 2021/5
N2 - Innovation and competition are two major pillars in the information technology (IT) industry. In this paper, we examine the causal relationship between product market competition and innovations in the IT industry. We measure the innovations from both the quantity (number of patents) and the quality (number of non-self citations) perspectives. Based on the Herfindahl-Hirschman Index and natural experiments, we find robust evidence that the competition has a positive effect on the innovations of the IT industry. Specifically, after the exogenous shock to the market (import tariff cuts and thus increased industry competition), the number of patents per IT firm increases by 27.3 percent, and the number of non-self citations per IT firm increases by 38.2 percent on average. The effects are more pronounced in the more competitive sectors. Our study highlights the importance of the competition in the IT industry and suggests that the positive effect of competition on innovation in the IT context is likely to be driven by the parallel search effect. Our findings contribute to the recent policy debate and suggest that reducing import barriers may bring important welfare gains through innovations in the IT industry.
AB - Innovation and competition are two major pillars in the information technology (IT) industry. In this paper, we examine the causal relationship between product market competition and innovations in the IT industry. We measure the innovations from both the quantity (number of patents) and the quality (number of non-self citations) perspectives. Based on the Herfindahl-Hirschman Index and natural experiments, we find robust evidence that the competition has a positive effect on the innovations of the IT industry. Specifically, after the exogenous shock to the market (import tariff cuts and thus increased industry competition), the number of patents per IT firm increases by 27.3 percent, and the number of non-self citations per IT firm increases by 38.2 percent on average. The effects are more pronounced in the more competitive sectors. Our study highlights the importance of the competition in the IT industry and suggests that the positive effect of competition on innovation in the IT context is likely to be driven by the parallel search effect. Our findings contribute to the recent policy debate and suggest that reducing import barriers may bring important welfare gains through innovations in the IT industry.
KW - import tariff
KW - information technology
KW - innovation
KW - IT innovation
KW - patents
KW - Product market competition
UR - http://www.scopus.com/inward/record.url?scp=85120952960&partnerID=8YFLogxK
U2 - 10.1080/07421222.2021.1962590
DO - 10.1080/07421222.2021.1962590
M3 - Journal article
AN - SCOPUS:85120952960
SN - 0742-1222
VL - 38
SP - 647
EP - 666
JO - Journal of Management Information Systems
JF - Journal of Management Information Systems
IS - 3
ER -