Generally, there could be several reasons behind to the lack of technology adoption. The literature has identified many factors that could affect a country’s technology adoption, such as human capital (Wozniak, 1987; Benhabib and Spiegel, 2005; Che and Zhang, 2018), trade and FDI (see Keller, 2004 for a review), and competition (Aghion et al, 2005; Seim and Viard, 2011).

With a cross-country regression framework, we show that the lack of competition could be one of the reasons behind MENA’s lack of technology adoption. Our measure for market competition is market concentration. The argument is that, _comparing within the same industry_ , countries or regions with higher market concentration tend to have weaker competition (see Berger and Hannan, 1989 and Bikker and Haaf, 2002 in the banking industry, and Sung, 2014 for the telecom industry). Market concentration is widely used to proxy for market competition. The calculation of market concentration indices such as <mark>Herfindahl-Hirschman Index (H</mark> HI) has been a starting point for assessing the state of market competition (see for example, U.S. Department of Justice and the Federal Trade Commission, 2010). Obviously, market c <mark>oncentration is just one indicator and does not contain all relevant information about competition. However, given our data limitation in cross-country regressions, it is our best choice.</mark> In general purpose industries (GPT) such as telecom and finance, there is a high level of market concentration in MENA. Table 4 and the associated graphical illustration in Figure 6 show that market concentration for Mobile Operators and Banking in MENA increases significantly faster as income rises than other countries with the same income (see the red lines in Figure 7)<sup>14</sup> . To account for possible nonlinearities we include a quadratic term. Figure 7 shows that for mobile operators, while market concentration is smaller in MENA when income is low, it quickly increases with a steep positive slope, while the slope for EAP is negative. For banking, asset concentration for both EAP and MENA is rising faster than the rest of the world, but MENA is above EAP in levels of asset concentration. This evidence is consistent with a popular notion that MENA does not fare well in market competition. For example, according to the World Bank’s Doing Business data, MENA countries are generally ranked very low in starting a business (e.g. Saudi Arabia is ranked 141, Egypt 109, Algeria 150, Iraq 155).<sup>15</sup> Results are robust to using regional dummies for all regions of the world (see Appendix Table A10).

> 14 For Mobile Operators, market concentration is calculated as annual average of quarterly HHI, based on market share of mobile operators provided by GSMA. For Banking, market concentration is calculated as assets of three largest banks as a share of assets of all commercial banks, data source is World Bank Database on Financial Development and Structure which was first constructed by Beck et al (2000).

> 15 As Arezki et al. (2018) argue, “MENA governments seeking to protect incumbents, especially in sectors like banking and telecommunications, impose excessive and outdated regulations that deter new actors from entering the market. This short-circuits competition, undermines the diffusion of general-purpose technology, and blocks the type of adaptation and evolution that underpins a vibrant private sector”.

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