ICT-based innovation and its competitive outcome: the role of information intensity

Abstract

PurposePrior research highlights the vital role of Information and Communication Technologies (ICT) for innovation in response to environmental conditions. However, there is a lack of studies that analyse the determinants of ICT investments on the innovation activities of firms in relation with their impacts on the industrial and competitive dynamics using large data sets. The paper aims to discuss these issues.Design/methodology/approachIn this paper, the authors investigate the effects of ICT investments on the industrial and competitive dynamics for a large and representative panel data set. All the industries are included, and lagged effects of ICT investments are studied. The model is tested on a seven-year panel (2008–2014) of 231 Italian industries using two-stage least squares instrumental-variables estimators with industry time and fixed effects.FindingsThe results indicate that munificent industries and higher ICT spending are interrelated facts, showing that in sectors with more growth opportunities firms invest more in ICT and this leads to higher industry concentration, greater profit dispersion and higher competitive turbulence in the sector. Also, the paper shows that SMEs can rarely take advantage of their ICT-based innovation to start high-growth phenomena.Practical implicationsThe results suggest that ICT-based innovation may create competitive advantages that are hard to sustain over the long-term raising important implications for managers involved in ICT-enabled innovations and policy-makers involved in building programs to foster innovation.Originality/valueAgainst the backdrop of today’s digital transformation, the paper enriches our understanding on the disruptive effects exerted by the digitalization of the innovation process and provides a base to continue the investigation of industrial changes and competitive dynamics.