Innovation and competition are two major pillars in the information technology (IT) industry. In this paper, we examine the causal relationship between product market competition and innovations in the IT industry. We measure the innovations from both the quantity (number of patents) and the quality (number of non-self citations) perspectives. Based on the Herfindahl-Hirschman Index and natural experiments, we find robust evidence that the competition has a positive effect on the innovations of the IT industry. Specifically, after the exogenous shock to the market (import tariff cuts and thus increased industry competition), the number of patents per IT firm increases by 27.3 percent, and the number of non-self citations per IT firm increases by 38.2 percent on average. The effects are more pronounced in the more competitive sectors. Our study highlights the importance of the competition in the IT industry and suggests that the positive effect of competition on innovation in the IT context is likely to be driven by the parallel search effect. Our findings contribute to the recent policy debate and suggest that reducing import barriers may bring important welfare gains through innovations in the IT industry.

Small and medium-sized businesses as well as individuals are increasingly using online crowdfunding platforms to raise funds in the fintech world. Creators of crowdfunding projects depend heavily on social networks like Facebook to publicize their projects. Social media activities such as “liking” on Facebook bring massive traffic to crowdfunding projects and attract contributions. Using data collected from Facebook and Kickstarter, our empirical tests demonstrate that social media activities significantly and positively impact the likely success of crowdfunding. Our duration model analysis reveals that the impact of social media activities on crowdfunding outcomes follows a J-curve in the temporal space. We explain the J-curve by identifying two important effects of social media activities throughout the crowdfunding process: a quality-signaling effect in the opening period and a herding effect in the closing period. Especially in the “last mile,” there is a strong herding effect that helps crowdfunding projects reach their respective fundraising goals. Our results offer useful contributions to the literature and suggestions for practitioners.