The role of the Internet in changing industry competition

Does the Internet lead to a more competitive industry or market? The popular view asserts that the Internet intensifies competition, but competing theories challenge this view, indicating the need for empirical support. This research examines the role of the Internet in changing the overall industry competition as measured by the Herfindahl–Hirschman index (HHI), industry profitability, the new entry ratio, and the ratio of firm number change. The results reveal significantly positive relationships between Internet use and change in the HHI and industry profitability and significantly negative relationships between Internet use and the new entry ratio and the ratio of firm number change. These findings suggest that instead of increasing industry competition, Internet use results in less competitive industry structures.