Paper Number

1836

Abstract

McAfee and Brynjolfsson (2008) provided evidence that the steep rise of information technology investments in the 1990s did not only yield higher overall productivity but also accelerated the competitive nature of U.S. industries. These changes have, among others, been attributed to a more efficient and quick propagation of innovative business processes due to information technology. Our paper sets out (a) to replicate their findings and (b) to extend their study by analyzing more recent trends. We compare over 60 U.S. industries between 1987 and 2018 by regressing IT intensity on three different measures of industry competition: sales turbulence, industry concentration, and performance spread of gross profit margin. The regression models indicate that industries that spend more on IT still display relatively higher competitive dynamics, but that, after a strong uprise between 1995 to 2005, there has been a substantial slowdown and trend reversal after 2005. Together, this indicates both a shift from information technology being a strategic differentiator to a strategic "must-have" commodity in firms and an indication that the majority of digital innovations are rather of a combinatorial than of a disruptive nature as they help top performers to continuously build out their superior market position.

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