The Technological Roots of Firm Market Power. An Empirical Investigation on the Dutch Economy

I investigate the dynamics of markups of price over marginal cost of intermediate inputs in the case of Netherlands over 2007-2017. Adopting multiple methodologies, I find that consistently with the literature, markups remained stable over time, although persistent heterogeneity remains over the cross section. Combining multiple firm level data sets, I explore the determinants of markup heterogeneity leveraging on innovation strategy, use of intangibles and ICT. I find that industries that are most knowledge intensive display the highest markups, profit rates and share of fixed cost over total cost, both for services and manufacturing. Moreover, firms with highest markups apply more often for intellectual property rights and are less intensive in ICT technologies that foster information sharing with external partners. Finally, both TFP and expenditure in R&D are negatively correlated with markups. These findings contribute to the debate on slowing business dynamism and the impact of technology on market power