The estimates in Table 2 show that firms with smaller market shares in 2002 are significantly less likely to be ISO-certified or use the web. Firms charging lower price-cost margins in 2005 are also less likely to be ISO-certified or use the web, though the effects are weak.<sup>16</sup> Moreover, we find that the pressure to innovate from competitors is only weakly positively correlated with technology adoption, with the exception of a significant correlation with web-use in 2005. However, we find that strong pressure to innovate from consumers increases significantly the likelihood of a firm being ISOcertified or using the web.

Given the challenges involved in measuring the degree of market competition faced by firms, we check the robustness of our results just discussed by replacing the dummies for the pressure to innovate from consumers and competitors by two alternative measures of competition based on Carlin et al. (2004). In columns (1)-(2) and (5)-(6) of Table 4, we use a measure of the elasticity of demand faced by the firm and find that firms facing a more elastic demand (i.e., whose customers would switch to buying the product from competitors as a result of a price increase) are less likely to be ISOcertified or use the web.<sup>17</sup> In columns (3)-(4) and (7)-(8) of Table 4, we use a measure of the total number of competitors faced by the firm in its main product in the domestic market and find no difference in ISO certification or web-use for firms facing no competitors versus firms facing 1-3 competitors or more than 4 competitors.

Taken together, our findings suggest that in ECA countries, concentration is more conducive to technology adoption than competition. This finding is consistent with the argument by Schumpeter (1942) that competition can be detrimental to innovation as it reduces the rents that successful innovators can appropriate. This finding is also consistent with the argument by Carlin et al. (2004) that firms in transition economies face resource constraints that make rents important in financing technology adoption. Accordingly, the results in Table 2 show that larger firms are significantly more likely to adopt advanced technology. The marginal effects are particularly large for web-use and suggest that, within a sector, firms with more than 250 workers are about 25% more likely to use the web than firms with less than 50 workers. Additionally, these findings on size are consistent with two related arguments. First, large firms may benefit from economies of scale in the adoption of new

> 16 The BEEPS 2002 survey provides information on market shares but also on price-cost margins both of which can be used to proxy for the competitive environment facing the firm. The regressions based on the BEEPS 2002 sample including price-cost margins provide qualitatively similar results: i.e., firms charging lower price-cost margins in 2002 are less likely to be ISO-certified or use the web. The BEEPS 2005 survey provides only information on price-cost margins. Therefore, that is the variable used to proxy for the competitive environment facing the firm in the regressions for the BEEPS panel sample.

> 17 See Appendix Table A1 for the definition of these alternative measures of competition.

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