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Dynamic Interactions Between Structure and Performance in the Textile and Clothing Industry in India: An Econometric Approach

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  • Tanveer Ahmad Khan

    (Institute of Development Studies Kolkata)

  • Indrani Chakraborty

    (Institute of Development Studies Kolkata)

Abstract

This study examines the dynamic relationship between structure, conduct and performance (SCP) in the Indian textile and clothing industry over the period 1995–2019. Building on the existing empirical and theoretical literature, this study also investigates the effect of MFA quota removal on the structure and performance of the industry. We employ Two Stage Fixed Effects Least Square method and Panel VAR model to study the relationship between structure, conduct and performance along with relevant exogenous variables. Firstly, we find robust evidence for the positive association between concentration and performance as predicted by the traditional SCP paradigm. We find performance variables responding positively to a shock in concentration variable. Secondly, we find lagged profitability affecting concentration negatively, thus attracting entry. From Granger causality results, we find a bidirectional causality between performance and concentration. Advertising is having an ambiguous impact on performance. We also find robust evidence for the negative impact of MFA phaseout on the performance of Indian firms. The industry has also seen a rise in concentration in post-MFA era.

Suggested Citation

  • Tanveer Ahmad Khan & Indrani Chakraborty, 2022. "Dynamic Interactions Between Structure and Performance in the Textile and Clothing Industry in India: An Econometric Approach," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(1), pages 173-209, March.
    • Handle: RePEc:spr:jqecon:v:20:y:2022:i:1:d:10.1007_s40953-021-00281-9
    DOI: 10.1007/s40953-021-00281-9
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    More about this item

    Keywords

    Structure-conduct-performance paradigm; MFA; PVAR; Granger causality; Concentration;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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