Calculated as sum of squares of market shares of 50

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• calculated as: sum of squares of market shares of 50 largest firms in an industry ranges from 0 (perfect competition) to 1.0 (monopoly) positive change in HHI = increased industry concentration and reduced competition INDUSTRY PROFITABILITY • calculated as: difference in industry profit-to-sales ratio positive change in profit = increased industry profitability and reduced competition NEW ENTRY RATIO & RATIO OF FIRM NUMBER CHANGE new entry ratio calculated as: difference of number of new firms to initial number of firms high entry ratio: reflects low entry barriers and indicates increase of industry competition ratio of firm number change calculated as: firm number change during a period to initial firm number positive ratio number: indicates increase in firm number and thus increased rivalry/competition 4.3 MEASURE OF INTERNET USE • no direct measure = main difficulty in research • combined approach: quantitative measure (inlink counts = direct online references that lead visitors to a website) + support of independent expert assessments 4.4 CONTROL VARIABLES & DATA control variables: initial HHI, industry size, industry growth, industry advertising intensity, R&D intensity • financial information of all US firms in 1997, 2006, 2010, 2011 from COMPUSTAT • exclusion of industries with fewer than three firms • four sectors with most industries for sector heterogeneity analysis: manufacturing (149 industries), wholesale (22) , retail (23), services (42)
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Zoe Zwiebelmann Maastricht University IM Session 2 4.5 MODEL ESTIMATION • operating equations wit transformed variables to test relationships between industry competition measures and Internet use: 5. RESULTS • industries become less competitive during 13-year-period with level of Internet use H0 + H1 rejected H2 supported model (1) + (2): initial level of HHI negatively related to concentration change = leading firms in
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