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Market dominance in the digital age

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  • Logan P Emery

Abstract

I document that the network structure of the online economy significantly contributes to rising industry concentration. Firms that are central in the online economy benefit more from increased economies of scale, decreased search costs, and network effects resulting from digitalization. Industries with firms that are more central become more concentrated and central firms have larger increases in market share. These results are driven by firms’ ability to generate revenue, as evidenced by central firms earning higher risk-adjusted returns and having more positive earnings surprises. Centrality is also associated with increasing productivity, but profitability only increases for central firms in business-to-consumer industries.

Suggested Citation

  • Logan P Emery, 2025. "Market dominance in the digital age," Review of Finance, European Finance Association, vol. 29(4), pages 1219-1258.
    • Handle: RePEc:oup:revfin:v:29:y:2025:i:4:p:1219-1258.
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    File URL: http://hdl.handle.net/10.1093/rof/rfaf025
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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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