Barriers to Entry and Profitability
AbstractBarriers to entry are regarded as major impediments to the working of markets. Entry must not necessarily actually take place - the perceived threat of entry may encourage incumbent firms to behave as if they are in a competitive market, even if they are not. We present empirical evidence on effects of perceived threat of entry on profitability. Using information from managers about how they assess the existence of entry barriers a strong impact of these assessments on profitability is confirmed. The number and the relative size of competitors also exert considerable effects. We find no statistically significant relation between the perceived threat of entry and the actual number of firms if the size of the relevant market is taken into account. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 08-071.
Date of creation: 2008
Date of revision:
Barriers to Entry; Profitability; Discrete Regression Models;
Find related papers by JEL classification:
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-03 (All new papers)
- NEP-COM-2009-01-03 (Industrial Competition)
- NEP-ENT-2009-01-03 (Entrepreneurship)
- NEP-IND-2009-01-03 (Industrial Organization)
- NEP-MIC-2009-01-03 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
- Jeffrey Campbell, 2000.
"Market Size Matters,"
Econometric Society World Congress 2000 Contributed Papers
1225, Econometric Society.
- Glenn Ellison & Sara Fisher Ellison, 2011.
"Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration,"
American Economic Journal: Microeconomics,
American Economic Association, vol. 3(1), pages 1-36, February.
- Glenn Ellison & Sara Fisher Ellison, 2007. "Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration," NBER Working Papers 13069, National Bureau of Economic Research, Inc.
- Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
- Czarnitzki, Dirk & Kraft, Kornelius, 2004.
"Innovation indicators and corporate credit ratings: evidence from German firms,"
Elsevier, vol. 82(3), pages 377-384, March.
- Czarnitzki, Dirk & Kraft, K, 2004. "Innovation indicators and corporate credit ratings: evidence from German firms," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/98651, Katholieke Universiteit Leuven.
- A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
- 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
- Schmalensee, Richard., 1987. "Inter-industry studies of structure and performance," Working papers 1874-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Gaskins, Darius Jr., 1971. "Dynamic limit pricing: Optimal pricing under threat of entry," Journal of Economic Theory, Elsevier, vol. 3(3), pages 306-322, September.
- Sutton, John, 2007. "Market Structure: Theory and Evidence," Handbook of Industrial Organization, Elsevier.
- Berry, Steven & Reiss, Peter, 2007. "Empirical Models of Entry and Market Structure," Handbook of Industrial Organization, Elsevier.
- Preston R. Fee & Hugo M. Mialon & Michael A. Williams, 2004. "What Is a Barrier to Entry?," American Economic Review, American Economic Association, vol. 94(2), pages 461-465, May.
- Kraft, Kornelius & Czarnitzki, Dirk, 2004.
"On the Profitability of Innovative Assets,"
ZEW Discussion Papers
04-38, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Czarnitzki, Dirk & Kraft, K., 2010. "On the profitability of innovative assets," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/205820, Katholieke Universiteit Leuven.
- Shaanan, Joseph, 1997. "Idle sunk cost capacity, entry, and profitability: An empirical study," Journal of Economics and Business, Elsevier, vol. 49(3), pages 267-283.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.