IDEAS home Printed from https://ideas.repec.org/a/bla/jindec/v55y2007i1p93-111.html
   My bibliography  Save this article

Innovation And Market Structure: An Empirical Evaluation Of The ‘Bounds Approach’ In The Chemical Industry

Author

Listed:
  • PEDRO L. MARÍN
  • GEORGES SIOTIS

Abstract

This paper applies Sutton's [1998]‘bounds approach’ to the chemical industry. The approach predicts that (i) the lower bound of the ratio of the 1‐firm concentration index to product concentration is bounded away from zero at high levels of product concentration only in high R&D markets and (ii) the lower bound on market concentration is higher and increasing in product concentration in markets with higher R&D intensities. We test these two hypotheses and find that the data strongly support them. A novel feature of our analysis is the use of plant level data in defining products and the classification of products into markets based on end‐use.

Suggested Citation

  • Pedro L. Marín & Georges Siotis, 2007. "Innovation And Market Structure: An Empirical Evaluation Of The ‘Bounds Approach’ In The Chemical Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 93-111, March.
    • Handle: RePEc:bla:jindec:v:55:y:2007:i:1:p:93-111
    DOI: 10.1111/j.1467-6451.2007.00304.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-6451.2007.00304.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-6451.2007.00304.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009, Elsevier.
    2. Steven Berry & Joel Waldfogel, 2010. "Product Quality And Market Size," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 1-31, March.
    3. Matraves, Catherine, 1999. "Market Structure, R&D and Advertising in the Pharmaceutical Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 47(2), pages 169-194, June.
    4. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107, Elsevier.
    5. Davies, Stephen, 1980. "Minimum Efficient Size and Seller Concentration: An Empirical Problem," Journal of Industrial Economics, Wiley Blackwell, vol. 28(3), pages 287-301, March.
    6. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057, Elsevier.
    7. Davies, Stephen & Lyons, Bruce, 1996. "Industrial Organization in the European Union: Structure, Strategy, and the Competitive Mechanism," OUP Catalogue, Oxford University Press, number 9780198289739.
    8. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    9. Robinson, William T & Chiang, Jeongwen, 1996. "Are Sutton's Predictions Robust?: Empirical Insights into Advertising, R&D, and Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 389-408, December.
    10. Catherine Matraves, 1999. "Market Structure, R&D and Advertising in the Pharmaceutical Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 47(2), pages 169-194, June.
    11. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pekka Ilmakunnas, 2008. "Lower Bounds of Concentration in a Small Open Economy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(1), pages 19-33, February.
    2. Gupta, Kartick & Banerjee, Rajabrata & Onur, Ilke, 2017. "The effects of R&D and competition on firm value: International evidence," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 391-404.
    3. Catherine Matraves, 2002. "European Integration and Market Structure in the Soft Drinks Industry," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 295-310.
    4. Silvana Robone & Alberto Zanardi, 2006. "Market structure and technology: evidence from the Italian National Health Service," International Journal of Health Economics and Management, Springer, vol. 6(3), pages 215-236, September.
    5. Banerjee, Rajabrata & Gupta, Kartick, 2021. "Do country or firm-specific factors matter more to R&D spending in firms?," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 75-95.
    6. Xu, Guannan & Wu, Yuchen & Minshall, Tim & Zhou, Yuan, 2018. "Exploring innovation ecosystems across science, technology, and business: A case of 3D printing in China," Technological Forecasting and Social Change, Elsevier, vol. 136(C), pages 208-221.
    7. Benjamin C. Anderson & Ian M. Sheldon, 2024. "R&D Concentration in Soybean and Cotton Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(1), pages 93-115, February.
    8. Laussel, Didier & Lahmandi-Ayed, Rim, 2010. "Natural oligopolies with exogenous sunk costs: A non-Suttonian result," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 844-854, September.
    9. Jan Guldager JØrgensen & Philipp J.H. Schr–der, 2003. "Reductions in Real versus Tariff Barriers: The Impact on Industry Concentration," Journal of Industry, Competition and Trade, Springer, vol. 3(4), pages 251-268, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Catherine Matraves & Laura Rondi, 2007. "Product Differentiation, Industry Concentration and Market Share Turbulence," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(1), pages 37-57.
    2. Catherine Matraves, 2002. "European Integration and Market Structure in the Soft Drinks Industry," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 295-310.
    3. Catherine Matraves, 1999. "Market Integration and Market Structure in the European Soft Drinks Industry: Always Coca-Cola?," CIG Working Papers FS IV 99-13, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    4. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2006. "Efficiency Gains from Mergers," Chapters, in: Fabienne IIzkovitz & Roderick Meiklejohn (ed.), European Merger Control, chapter 3, Edward Elgar Publishing.
    5. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    6. Senyuta, Olena & Žigić, Krešimir, 2016. "Managing spillovers: An endogenous sunk cost approach," Information Economics and Policy, Elsevier, vol. 35(C), pages 45-64.
    7. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    8. Ghosal, Vivek, 2002. "Impact of Uncertainty and Sunk Costs on Firm Survival and Industry Dynamics," Royal Economic Society Annual Conference 2002 86, Royal Economic Society.
    9. Steen, Frode & Sorgard, Lars, 1999. "Semicollusion in the Norwegian cement market," European Economic Review, Elsevier, vol. 43(9), pages 1775-1796, October.
    10. Martin Gaynor, "undated". "What Do We Know About Competition and Quality in Health Care Markets?," GSIA Working Papers 2006-E62, Carnegie Mellon University, Tepper School of Business.
    11. Asplund, Marcus, 2002. "Risk-averse firms in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 995-1012, September.
    12. Jan Guldager JØrgensen & Philipp J.H. Schr–der, 2003. "Reductions in Real versus Tariff Barriers: The Impact on Industry Concentration," Journal of Industry, Competition and Trade, Springer, vol. 3(4), pages 251-268, December.
    13. Marcelo Resende, 2009. "Concentration and market size: lower bound estimates for the Brazilian industry," Economics Bulletin, AccessEcon, vol. 29(3), pages 2465-2471.
    14. Sascha A. Weber & Sven M. Anders, 2007. "Price rigidity and market power in German retailing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 737-749.
    15. Sabien Dobbelaere & Jacques Mairesse, 2013. "Panel data estimates of the production function and product and labor market imperfections," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(1), pages 1-46, January.
    16. O. Cem Ozturk & Sriram Venkataraman & Pradeep K. Chintagunta, 2016. "Price Reactions to Rivals’ Local Channel Exits," Marketing Science, INFORMS, vol. 35(4), pages 588-604, July.
    17. Jean Marie Abraham & Martin Gaynor & William B. Vogt, 2007. "Entry And Competition In Local Hospital Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 265-288, June.
    18. Catherine A. Durham, 1991. "The Empirical Analysis of Oligopsony in Agricultural Markets: Residual Supply Estimation in California's Processing Tomato Market," Food Marketing Policy Center Research Reports 015, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    19. Nair-Reichert, Usha & Pomery, John, 1999. "International R&D rivalry and export market shares of unionized industries: Some evidence from the US manufacturing sector," Journal of International Economics, Elsevier, vol. 49(1), pages 77-97, October.
    20. Gual, Jordi, 2003. "Integration of EU banking markets, The," IESE Research Papers D/504, IESE Business School.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jindec:v:55:y:2007:i:1:p:93-111. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.