Kiel Working Papers, Kiel Institute for World Economics
No 1517:
Market Concentration and Business Survival in Static v Dynamic Industries
Andrew Burke and Aoife Hanley
Abstract: We propose that the effect of market concentration on firm
survival is different according to whether an industry is static (low entry
and exit) or dynamic. In our empirical analysis we find support for this
hypothesis. Industry concentration rates reduce the survival of new plants
but only in markets marked by low entry and exit rates. Specifically, a 10
percent increase in the 5-firm concentration ratio in a dynamic market
raises the survival rate of new ventures by approximately 2 percent. Our
results have implications for the antitrust/competition law indicating less
need for regulation of dominant firms in dynamic industries characterized
by high entry and exit rates. We use a unique dataset comprising the
population of new ventures that enter the UK market in 1998
Keywords: new firms, start-ups, survival, dynamism, competition policy, industry concentration; (follow links to similar papers)
JEL-Codes: L11,; L25,; M13,; M40; (follow links to similar papers)
30 pages, May 2009
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