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Entry Regulation and Persistence of Profits in Incumbent Firms

Author

Listed:
  • Sameeksha Desai

    (Indiana University)

  • Johan E. Eklund

    (Swedish Entrepreneurship Forum
    Jönköping International Business School
    Blekinge Institute of Technology)

  • Emma Lappi

    (Swedish Entrepreneurship Forum
    Jönköping International Business School)

Abstract

In line with the theory of creative destruction, industries where incumbent firms generate high profits will attract entry, which should drive down profits. This disciplinary effect of entry implies that profits above the norm should not exist in the long run. Factors that affect entry—such as entry regulations—could affect this profits convergence process. Using an unbalanced panel of firm- and country-level data for approximately 13,000 firms in 33 countries between 2005 and 2013, we examine the profit dynamics of incumbent firms in the context of entry and entry regulations.

Suggested Citation

  • Sameeksha Desai & Johan E. Eklund & Emma Lappi, 2020. "Entry Regulation and Persistence of Profits in Incumbent Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 537-558, November.
    • Handle: RePEc:kap:revind:v:57:y:2020:i:3:d:10.1007_s11151-020-09787-7
    DOI: 10.1007/s11151-020-09787-7
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    More about this item

    Keywords

    Entry; Entrepreneurship; Entry regulation; Profit; Incumbent firm; Creative destruction;
    All these keywords.

    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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