Big data application and firm markups: evidence from China

Abstract This study investigates the relationship between big data applications and firms’ price markups. By constructing a heterogeneous firm model with variable markups, we analyze the mechanisms through which big data applications influence firms’ price markups and conduct empirical tests using micro-level firm data. The results indicate that big data applications significantly enhance firms’ price markups. Mechanism analysis reveals that promoting product innovation and improving production efficiency are two key channels through which big data applications contribute to higher markups. Furthermore, the positive effect of big data applications on firms’ markups exhibits heterogeneity across organizational, technological, and environmental dimensions. These findings suggest that while big data applications positively influence firms’ markups, the realization of this effect depends on the synergistic support of various complementary resources. The research uncovers the intrinsic mechanisms through which big data applications shape firms’ competitive advantages and market power, providing valuable insights for policy formulation.