Exploiting the unexpected Central Environmental Inspections (CEI) in China as a quasinaturalexperiment, we find that public firms in polluting industries experience significant gains in both profitability and market valuation after the regulatory shock, relative to firms in nonpolluting industries. The outperformance of public firms can be explained by the retreat of their private competitors, many shut down due to poor environmental performance. Because firms seeking public listing are required to meet high environmental standards, CEI significantly strengthen public firms’ competitive position, leading to increased sales growth and market share. Moreover, the outperformance is more pronounced for firms with more eco-friendly technologies, consistent with strict environmental regulations increasing the marginal benefit of these technologies. We provide novel evidence of the bright side of environmental regulation by highlighting the importance of industry dynamics.

We examine the rise of cloud computing and AI in China and its impact on industry dynamics. We find that industries that depend more on cloud infrastructure experience a higher increase in firm entry and exit after cloud computing expands in China. The positive relation with firm exit is driven by the increased exit through business failure and adjustments. We also compare cloud computing to artificial intelligence (AI) and show a differential effect of these technologies on exit. For AI, larger incumbents are less likely to exit. M&A is also more likely for cloud computing but not for AI. Concentration decreases post-cloud computing expansion but increases post-AI. These findings point to changes in competition from new technologies but with differential effects based on which types of firms are likely to adopt new technologies.

We examine the rise of cloud computing in China and its impact on industry dynamics. We find that industries which depend more on cloud infrastructure experience a higher increase in firm entry and exit after cloud computing expands in China. The positive relation with firm exit is driven by the increased exit through business failure and adjustments as well as the increase in the exit of less productive incumbents. Despite the large numbers of firms that exit, the number of firms increases as entryaccelerates and the competition increases in industries with more exposure to cloud infrastructure. The average age of firms also becomes younger in industries with more exposure to cloud infrastructure. Finally, we show that equity financing increases for industries impacted by cloud computing and the positive impact is more pronounced for younger firms. These findings point to increased competition and increased industry churn through the technological effects of cloud computing.