The Impact of Cloud Computing and AI on Industry Dynamics and Concentration / Yao Lu, Gordon M. Phillips, Jia Yang.

Format:

Book

Author/Creator:

Lu, Yao.

Contributor:

Phillips, Gordon M.

Yang, Jia.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w32811.

NBER working paper series no. w32811

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2024.

Summary:

We examine the rise of cloud computing and AI in China and their impacts on industry dynamics after the shock to the cost of Internet-based computing power and services. We find that cloud computing is associated with an increase in firm entry, exit and the likelihood of M&A in industries that depend more on cloud infrastructure. Conversely, AI adoption has no impact on entry but reduces the likelihood of exit and M&A. Firm size plays a crucial role in these dynamics: cloud computing increases exit rates across all firms, while larger firms benefit from AI, experiencing reduced exit rates. Cloud computing decreases industry concentration but AI increases concentration. On the financing side, firms exposed to cloud computing increase equity and venture capital financing, while only large firms increase equity financing when exposed to AI.

Notes:

August 2024.

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