PRICE-COST MARGINS AND INDUSTRY STRUCTURE IN DEVELOPING COUNTRIES: THE CASE OF KOREA*

The structure-conduct-performance paradigm is tested using 4-digit SIC Korean industry data for 1981 and 1986. The study investigates whether the observed institutional differences between developed and developing countries affects the performance hypothesis. The results suggest that structure and conduct variables influence price-cost margins in much the same way as they do in developed countries. Nevertheless, the Korean government's credit rationing policies, by creating entry barriers, have the most important effects on industry performance.     

资源再生产业特征解析:基于“结构-行为-绩效”范式的研究

借鉴经典"结构—行为—绩效"范式,以资源型产业为参照对象,从资源再生产业的市场结构、市场行为和市场绩效三个角度,对资源再生产业特征进行深入解析,研究认为:资源再生产业是一个"落脚自由"的产业,技术弹性大,产业链较长,产业关联度大,具有规模经济性,兼具劳动密集型和技术密集型双重特征。这样的市场结构,决定了其市场波动性大,生产规模较小,经营灵活;反映到市场绩效上,其环境外部性表现出双面性,既具有明显的环境正外部性,又表现了很强的负外部效应。     

中国西部工业产业组织实证分析——基于SCP范式

由哈佛学派创立的"市场结构-市场行为-市场绩效"分析范式,是西方正统产业组织理论的重要内容.文章主要依据产业组织理论,运用SCP范式对中国西部工业的大量数据进行结构、行为及绩效的实证分析,并在此基础上得出结论,提出相应的政策性建议.     

Intangible capital,market share and corporate strategy

This paper theoretically and empirically identifies the determinants of firm profitability and market share for twelve broadly defined US manufacturing industry groups. The effects of advertising, research and development, and diversification on profitability and market share are econometrically tested for each industry group, and corporate strategy implications of the results are considered. One major result of the analysis is that research and development (R&D) tends to be much more effective as a means of enhancing firm profitability than advertising, and research and development spending decisions are more closely related to the profitability of R&D than advertising decisions are related to the profitability of advertising.     

Measuring the effects of advertising on green industry sales: a generalized propensity score approach

This article estimates the effects of advertising expenditures on annual gross sales of green industry firms using a quasi-experimental framework. In order to account for potential selection bias, a generalized propensity score and a dose-response function are used to estimate advertising treatment effects. The method used allows us to investigate the relationship between the dose (advertising expenditures) and the response (firm sales). We use data from the National Green Industry Surveys of 2009 and 2014 to conduct the analysis. To further investigate potential heterogeneous advertising effects of the size of the firms, we separate the sample into small firms and large firms, according to their annual gross sales. The results indicate that the magnitude and shape of the response function depend on the size of the firm. For small firms, increasing advertising spending yields to higher sales within a range of advertising spending. Beyond this range, advertising spending increases do not impact sales any more. Thus, small firms’ management should carefully monitor advertising input. For large firms, on the other hand, the current evidence does not support a positive relationship between advertising spending and sales since the marginal treatment effect is insignificant almost over the entire range of adverting spending.     

Television advertising and profitability

To date, economists have largely ignored the possibility that various advertising media may have differential impacts on firm performance. Here an empirical analysis reveals that television advertising has a significantly greater positive impact on firm profitability than does advertising in general.     

Measuring advertising intensity and intangible capital in the Greek food industry

The objective of the present paper is to examine market conduct and its determinants in the Greek food industry and to measure how and to what degree the industry and the firm's structural characteristics affect advertising intensity. An advertising intensity model giving emphasis to intangible capital is formulated. Data from ICAP have been used on a four-digit classification for the food industry during the 1990–1997 period. The empirical results indicate that intangible capital positively affects the advertising intensity of the firm and plays an important role in strategies that affect total cost, demand and structure of the market.     

A simultaneous equations study of research and development intensity

This paper presents a simultaneous equations model of profitability, concentration, advertising, and research and development outlays. We find that research and development intensity tends to increase in more concentrated industries, although this effect is negated in industries where technological opportunities are excellent. Also, high levels of research and development may reduce concentration while tending to add to industry profitability. These results suggest that the government should not be concerned with the possibility of an adverse impact of market concentration on research and development, although the evidence suggests that certain high technology industries may be at a small risk.     

Scale elasticities in Ghanaian cocoa production

The objective of this study is to develop a simultaneous equations model of profitability, concentration, advertising expenditures and research and development outlays. The data used in the estimation are subjected to regression diagnostics in an effort to determine the importance to the estimation results of a subset of the data that can have a disproportionate influence. The estimation results, especially for the advertising expenditures relationship and the research and development outlays equation, do change when a truncated data sample (based on the omission of the outliers) is used. This serves partly to explain why there is some disagreement in the literature on market structure and economic performance with regard to the impact of several economic factors.     

CONCENTRATION-PROFITS MONOPOLY VS. EFFICIENCY DEBATE: SOUTH AFRICAN EVIDENCE

Using the new official measures of concentration, this study finds a strong and highly significant correlation between concentration and industry profitability for South African manufacturing industries. This correlation is consistent with both the monopoly hypothesis of the traditional structure-conduct-performance paradigm and Demsetz's efficiency hypothesis that concentration of industry reflects the dominance of superior low-cost firms. Using the four-firm concentration ratio, this study applies Chappell and Cottle's extension of the Demsetz test to distinguish between the monopoly explanation of this correlation and the efficiency explanation. Using a conventional regression specification of the concentration-profits relationship with no control for efficiency, this study finds a statistically significant coefficient only for the industry and large size class regressions. Because small firms should do at least as well as large firms, under the price umbrella provided by large firms, this result is inconsistent with the monopoly hypothesis but consistent with the efficiency hypothesis. Specifying a variable that measures the efficiency of large plants relative to smaller plants—the cost advantage ratio—yields striking results. Similar to the results obtained by Chappell and Cottle for the United States, this study finds the efficiency variable to be highly significant in the industry and large size class regressions, while concentration becomes insignificant. Moreover, the efficiency variable is insignificant in the smaller size classes Both the statistical insignificance of concentration and the pattern of the efficiency variable coefficients suggest that including concentration in the regression specification without the efficiency variable simply highlights the effect of the efficiency variable. Coming as they do from an environment as different from the United States as the South Africa of the 1980s, these results strongly support the Demsetz efficiency hypothesis.     

Causes and effects of vertical intergration

This paper sets out to define new measures of industry-average forward and backward integration, and incorporate them into an empirical stucture–conduct–performance model. Results suggest that integration is encouraged where there are relatively few firms in an industry and if sales are increasing. Forward integration occurs in reaction to large outgoing distribution margins. Backward integration acts to increase concentration, at least in some parts of the manufacturing sector. Integratin has a complex and interactive effect on profitability, serving sometimes to raise profitability and sometimes to lower it.     

Merger Profitability and Trade Policy

We study the profitability incentives for merger and the endogenous industry structure in a strategic trade policy environment. Merger changes the strategic trade policy equlilibrium. We show that merger can be profitable and welfare enhancing, even though it would not be profitable in a laissez‐faire economy. A key element is a change in the governments’ incentives to give subsidies to their local firms. National merger induces more strategic trade policy, whereas international merger does not.     

Measuring the degree of competition in Pakistan’s banking industry: an empirical analysis

Pakistan’s banking industry has gone through significant transformation from being in a heavily state regulated and controlled environment to a more liberalized market structure in recent years. This liberalization of banking industry in Pakistan has raised concerns over the dominant banks’ exercise of market power on account of increase in market concentration due to mergers and acquisitions, high profitability in banking sector and increasing interest rate spread. Present study therefore explicitly tests the market conduct of banks using quarterly panel data of 30 banks from 2004 to 2012 and employing Panzar–Rosse, Bresnahan–Lau, Hall–Roeger and Boone’s approaches to study market power. Our findings suggest that Pakistan’s banking industry is working in a competitive environment and we find little evidence for the exercise of market power by the dominant banks. Our results remain robust across all these approaches to measure market power. These findings indicate that the liberalization and deregulation of Pakistan’s banking industry has been successful in improving the competitive conditions in the market.     

Interim efficient auctions with interdependent valuations

We provide a characterization of interim efficient auctions and examine their properties in the presence of informational interdependent valuations. We show that buyers can be awarded the auctioned item less often than the efficient level. We also show that buyers obtain the item more often as the degree of heterogeneity in preferences increases, even though profitability of trade does not depend on the heterogeneity in preferences.     

Diversification strategies and firm performance in Vietnam

This paper is based upon the assumption that a firm's profitability is determined by its degree of diversification which is, in turn, strongly related to the antecedent decision to carry out diversification activities. This calls for an empirical approach that permits the joint analysis of the three interrelated and consecutive stages of the overall diversification process: diversification decision, degree of diversification and outcome of diversification. We apply parametric and semi‐parametric approaches to control for sample selection and the endogeneity of the diversification decision in both static and dynamic models. For the analysis, we use the census dataset on the whole firm population in Vietnam, as a representative of transition countries. After controlling for industry fixed‐effects, the empirical evidence from the firm‐level data shows that diversification has a curvilinear effect on profitability: it improves firms’ profit up to a point, after which a further increase in diversification is associated with declining performance. This implies that firms should consider optimal levels of product diversification when they expand their product offerings beyond their core business. Other noteworthy findings include the following: (i) the factors that stimulate firms to diversify do not necessarily encourage them to extend their diversification strategy; (ii) firms that are endowed with highly technological resources and innovation investment are likely to successfully exploit diversification as an engine of growth; and (iii) while industry performance does not have a strong influence on the profitability of firms, it impacts their diversification decision as well as the degree of diversification.     

The Effect of Market Structure on Banks’ Profitability and Stability: Evidence from ASEAN-5 Countries

This paper analyses the effect of market structure on profitability and stability using the sample of 130 commercial banks in ASEAN-5 countries (Indonesia, Malaysia, Philippines, Singapore and Thailand) over the period from 2001 to 2013. More specifically, this study investigates the relevance of the structure conduct performance (SCP) and the relative market power (RMP) hypotheses. This paper also examines the relevance of ‘concentration-stability’ and ‘concentration-fragility’ hypotheses in the case of ASEAN-5 banking. In doing so, we control for the effect of bank-specific and country-specific factors. Empirical results based on system-generalised method of moments (GMM) analyses support the RMP hypothesis but fail to support the SCP hypothesis. We find that concentration stabilizes the banking sector. Evidence also highlights the importance of bank-specific controls related to capitalization and costs on profitability and stability. Implications for policy-makers are addressed.     

Corporate monopoly power and risk

The relationship between monopoly power and concentration may be influenced by the ‘riskiness’ of the firm. Two related issues are considered in this paper: the impact of market structure and conduct on the risk of the firm and the impact of risk upon the relationship between profitability and concentration. An a priori relationship between risk, market structure and profitability is derived within the mean-variance framework of the Capital Asset Pricing Model.     

我国商业银行市场结构和市场绩效的实证分析

运用DEA模型从市场结构和市场绩效两方面对我国商业银行进行检验分析,显示我国银行业的集中度、市场份额与绩效呈负相关关系,原因主要在于我国银行业市场结构较高的集中度不是市场自发作用的结果,大的银行规模并不意味着更高的利润回报。我国银行集中度和绩效之间不存在结构理论中所假设的因果关系,银行业市场结构对绩效的促进作用不明显。建立和完善我国银行业绩效考核体系时着重强调的应该是效率,而非银行规模和市场份额。     

Entry and industry evolution: the UK car industry, 1958—83

This paper models entry and the subsequent changes in market structure in three segments of the UK car industry, 1958–83. The entry equation emerges from a dynamic optimization model which allows for the costs of acquiring market share. The model is used to explore the hypothesis that the market penetration of entrants in this industry was facilitated by a post-entry advertising war which the incumbent firms lost. The basic hypothesis under examination is that advertising both facilitates and restricts entry, but that it does so in a way that varies systematically over time. The data are consistent with this view, showing that high advertising shares readily translate into high market shares, but that the escalation of industry advertising caused by entry can make high advertising entry strategies increasingly costly over time.