Industry Concentration in Europe and North America

Abstract

This report presents new evidence on industry concentration trends in Europe and in North America. It uses two novel data sources: representative firm-level concentration measures from the OECD MultiProd project, and business-group-level concentration measures using matched Orbis-Worldscope-Zephyr data. Based on the MultiProd data, it finds that between 2001 and 2012 the average industry across 10 European economies saw a 2-3-percentage-point increase in the share of the 10% largest companies in industry sales. Using the Orbis-Worldscope-Zephyr data, it documents a clear increase in industry concentration in Europe as well as in North America between 2000 and 2014 of the order of 4-8 percentage points for the average industry. Over the period, about 3 out of 4 (2-digit) industries in each region saw their concentration increase. The increase is observed for both manufacturing and non-financial services and is not driven by digital-intensive sectors.

Bits and bolts

“…Indeed, several studies indicate that it has increased in both manufacturing and services in the United States (Furman and Orszag, 2015;Gutiérrez and Philippon, 2017;Grullon et al, 2017 andAutor et al, 2017a) and Japan (Honjo, Doi and Kudo, 2014). The evidence for other parts of the world is to date limited and inconclusive, but a new OECD report suggest that a similar increase also took place in Europe (Bajgar et al, 2019a). This section briefly presents trends in manufacturing for Europe and North America based on a matched Orbis-Worldscope-Zephyr database of financial and ownership information.…”

“…At the same time as some of the indicators discussed in the previous sections indicate a declining business dynamism, the pace of acquisitions is reaching record highs. Globally the number of mergers and acquisitions (M&As) has more than doubled between 2003 and 2015 and their value today is at a similar level as at the peak of the dot-com bubble and during the run-up to the Great Recession (Bajgar et al, 2019a). Some of the M&As indicate industry consolidation, but many others serve as a channel for diffusion of digital technologies, as witnessed by a particularly large number of M&As by manufacturing companies targeting digital start-ups.…”

What makes a productive Russian firm? A comparative analysis using firm-level data

“…Most countries observe a widening gap between firms at the productivity frontier and firms lagging behind the frontier. This gap is often ascribed to fewer knowledge and technology spillovers from productive to less productive firms and slowing innovation among the lagging firms (Andrews, Criscuolo, and Gal (2016 [11]), Kierzenkowski et al (2018[12])). While firms at the productivity frontier grow in terms of productivity, firms lagging behind the frontier stagnate, and the productivity gap between the frontier and other firms widens.…”

“…If the firm is owned by an entity based in a European country, productivity rises by another 18%. 11 Ownership by entities from a country known as a tax haven does not have an additional impact on productivity.…”

“…This ensures excluding firms that underwent acquisitions or similar shocks that could under-determine the data analyses. The data cleaning also removes financial (Nace 2 Rev.2, Section K) and administrative sectors (Nace 2 Rev.2: 84.00 and above) (Gal (2013[18])Andrews, Criscuolo, and Gal (2016 [11])).…”