This research explores the extent to which Internet technology firms’ competitive actions shape the diffusion of their respective products in competition with rivals. Combining competitive dynamics perspective with technology diffusion, we extend macro innovation diffusion model by incorporating four micro-level firm actions, including firms’ competitive intensity, action timing, action simplicity and action dissimilarity. We validate the model with longitudinal field data from two pairs of competing Internet technology products in search engine and consumer-to-consumer electronic markets. The results reveal how firms’ competition efforts at action level influence technology products diffusion rate. Specifically, action timing has a negative effect on the diffusion of Internet technology products while action dissimilarity has a positive effect, which indicates that quick response and differentiation of strategies can help Internet technology firms obtain competitive advantages. This study has filled out prior research gaps of both competitive innovation diffusion and competition dynamics, by combining them together. Furthermore, this study conveys important practical implications to Internet businesses.