This paper addresses two puzzles related to industrial dynamics and competition. The first of these puzzles is that a high degree of globalization may well go hand in hand with increasing concentration. I show that one of the most globalized sectors of the electronics industry, hard disk drives (HDD), also displays one of the highest degrees of concentration: multinational corporations, after all, may not be such effective “spoilers of concentration”, as claimed by Richard Caves (1982). 4 The second puzzle that I address in this paper is that, despite an extremely high degree of concentration, this industry fails to act like a stable global oligopoly. So far, market share volatility has been restricted to the oligopoly members. There are however indications that this may change and that market contestability may improve. The paper is organized as follows: I start with a discussion of the first puzzle, presenting evidence on globalization and concentration. I then address the second puzzle, linking high concentration to high volatility. Some possible explanations are reviewed in the third part of the paper, building on a conceptual framework introduced by G.B. Richardson ( 1996 and 1997). I analyze how globalization affects competition and distinguish forces that foster concentration and forces that are conducive for market disruption. I conclude with a few observations on what this implies for future research on the determinants of market structure and firm behavior.
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Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number
97-9.
Find related papers by JEL classification: D21 - Microeconomics - - Production and Organizations - - - Firm Behavior L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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