Structure, conduct and performance: a simultaneous equations approach

Abstract

A simultaneous equations framework is used to study the relationship between structure, conduct and performance in US manufacturing in the 1980s and 1990s. The paper expands on earlier structure-conduct-performance studies by using a lag structure to signify that structure, conduct and performance do not affect one another contemporaneously. Findings support some aspects of the traditional structure-conduct-performance model, but challenge others. First, the data suggest that industry structure does not depend on current industry performance. Second, little evidence is found that industry conduct, proxied by advertising, is affected by industry structure. Third, results show that industry performance does not depend on industry conduct, though it is sensitive to industry structure. The main findings are that (1) concentration does not depend on firm profitability, though profitability depends on concentration, (2) advertising follows a process that is independent of the factors considered here, and (3) advertising seems to have no effect on profitability.

Industrial concentration and price-cost margin of the Indonesian food and beverages sector

“…This result is also supported by the data, given that every year, on average, the industry experienced about 18.1% of price-cost margin from 1995-2006 (see Table 1). The results presented here also support the findings of other studies, such as Shirazi (1974), Prince andTurik (1992), Kalirajan (1993), Go, Kamerschen, and Delorme (1999), and Delorme, Kamerschen, Klein, and Voeks (2002), which found a positive impact of industrial concentration on the price-cost margin.…”

The effect of public involvement on firm inefficiency: evidence using Japanese private firms

“…Empirical studies also support the negative effect on performance (e.g. Horn et al 1994;DeLorme et al 2002;Resende 2007). Thus, the relationship between competition and firm performance is ambiguous.…”

“…Pantalone and Platt (1997) also argue that there are situations where competition is too severe for firms to improve efficiency. Moreover, DeLorme et al (2002) and Resende (2007) show that firms achieve higher performance when the market is monopolistic. As discussed, market competition has both positive and negative effects on firm inefficiency.…”

Market dynamics and dichotomy: evidence from Taiwanese manufacturing

“…From the 1940s until the 1980s, there are numerous studies explaining market structure and performance. A review can be found in Delorme et al (2002). Market concentration has been considered as a key element of market structure.…”