Information, Beliefs and Resource Allocation in Competitive Markets: the Impact of It and Big Data on Smes
Abstract: Technology may improve communication and coordination of resources within firms, but it may also provide information about the firms’ competitive environment. While the existing literature has focused on the former, using large corporations as empirical context, the study of the latter is scant. We fill this gap in the literature by evaluating the impact of a “big data” information technology diffused by a large Spanish bank among its small and medium-size business customers. Using proprietary data on credit card transaction information, we show that technology adoption increases establishment revenue by 9%. The main mechanism behind this result appears to be the information technology prompting establishments to target existing, yet unexploited, business opportunities. Consistent with this mechanism, we find that adopting establishments increase their sales to underserved customer segments. Not only they increase their number of customers, their new customers also come from underrepresented geographic areas and gender-age groups in their customer portfolio prior to adoption. Our evidence also suggests that establishments improve their resource allocation efficiency upon technology adoption.
