Software Availability and Entry

What happens to market structure as an industry’s operations lean ever more on software? We find that software availability is associated with an increase in entry and an increase in exit by the oldest and most established firms. We formalize alternative mechanisms by which this could happen and their implications to disentangle which mechanism is most consistent with observed patterns. We find the effect of software availability on entry is stronger in settings with more available IT talent, more permissive labor policies, and greater demand uncertainty. Observed patterns are most consistent with software being a complement for labor for firms able to organize around it