The Impact of Domestic Search Engines on the Development of the Internet

A large volume of studies has attempted to identify key factors in Internet development using the various sources (such as OECD, EU, Asian countries, and/or the countries the ITU database) with various econometric estimations (such as OLS regression, factor analysis, static/dynamic panel data models, etc.) in different analysis durations. These factors include income, education level, population density, urbanization, broadband price, degree and types of competition (inter vs. intra platform and/or facilities-based vs. service-based), computer penetration, arguably mobile penetration, amount of online content, the stage of broadband diffusion and etc. This study adds one more key factor, domestic search engine on previous findings, which was not previously discussed in academia.The world search engine market has been dominated by a few global search engine platforms, most notably Google, Yahoo! and Bing; however, a few domestic search engines were successfully competing with global search engines and achieved dominance in their domestic markets. As of 2013, five of more than 100 countries in our analysis — namely, China, South Korea, Japan, Russia, and the Czech Republic — possess their own domestic search engines, which, on average, take more than 50% of the domestic market share.In this study, we quantified the contributions made by domestic search engines to the development of the Internet. A domestic search engine, compared to a global search engine, generates a better quality of domestic search results. It usually connects more users with localized content written in a domestic language, resulting in higher search relevance. It also generates private databases with more localized content, such as knowledge-sharing services that are better suited to local consumers. This quality improvement by the domestic search engine(s) may increase the domestic Internet user base, which in turn leads the development of the Internet.For this, we constructed a country-level dynamic panel of more 100 countries for relatively long period (from 1995 to 2013) taken from industry and government sources. The data includes the economic and cultural status of each country along with trends in, (broadband) Internet penetration, and other indices indicating the development of information and communication technologies. We then estimated the increase in the number of Internet users and broadband penetration in countries possessing domestic search engines, using linear generalized method of moments (GMM) estimators which allowed us to use internal instruments and to control for autocorrelation, unobserved heterogeneity, and the endogeneity of some control variables.Our preliminary analysis indicates that the development of a domestic search engine leads to Internet development: A country with its own domestic search engine platform(s) has larger broadband penetration and/or more number of Internet users than one without such a platform. This finding preliminarily confirms the hypothesis that a domestic search engine has a positive effect on the domestic development of the Internet. Our findings may provide valuable evidence that can be taken into account by scholars, political leaders and Internet policy makers who seek to gain insight into the benefits of domestic search engines. The reasons behind this finding and its policy implications will be also discussed.