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Market Structure and Competition: Assessment of Malaysian Pharmaceutical Industry based on the Modified Structure-Conduct-Performance Paradigm

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  • Chong, Hooi Ying
  • Chan, Tze-Haw

Abstract

This study assesses the market structure and competitiveness of Malaysian pharmaceutical industry. A panel analysis of 41 pharmaceutical manufacturing firms over 2004-2012 is conducted founded on the modified Structure-Conduct-Performance (SCP) framework. Our study reveals that the Malaysian pharmaceutical industry is highly concentrated (oligopoly) and the major findings are threefold. First, anti-competitive practices subsist among the pharmaceutical firms. Major players may have greater control over the markets and potentially colluded to gain better profits. Second, selling intensity is evident to raise the firms’ business performance, suggesting that advertisement, marketing campaigns, product differentiations and distribution efforts could be effective in building competencies over the rivals. Third, the study has tackled the endogeneity problem of traditional SCP with dual causal effects found between business conduct and business performance. Firms and authorities should consider the interactive mutual influences of structure-conduct-performance when formulating their respective management decisions and regulatory rules.

Suggested Citation

  • Chong, Hooi Ying & Chan, Tze-Haw, 2014. "Market Structure and Competition: Assessment of Malaysian Pharmaceutical Industry based on the Modified Structure-Conduct-Performance Paradigm," MPRA Paper 59537, University Library of Munich, Germany, revised 15 Sep 2014.
    • Handle: RePEc:pra:mprapa:59537
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    References listed on IDEAS

    as
    1. Athanasoglou, Panayiotis P. & Brissimis, Sophocles N. & Delis, Matthaios D., 2008. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 121-136, April.
    2. Shaik, Saleem & Allen, Albert J. & Edwards, Seanicaa & Harris, James, 2009. "Market Structure Conduct Performance Hypothesis Revisited Using Stochastic Frontier Efficiency Analysis," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 48(3).
    3. Zaheer Ud Din Babar & Mohamed Izham Mohamed Ibrahim & Harpal Singh & Nadeem Irfan Bukahri & Andrew Creese, 2007. "Evaluating Drug Prices, Availability, Affordability, and Price Components: Implications for Access to Drugs in Malaysia," PLOS Medicine, Public Library of Science, vol. 4(3), pages 1-10, March.
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    Cited by:

    1. Shui Ling Wong & Saliza Ibrahim & Norazlin Abdul Kadir & Salbiah Mohd Salleh, 2019. "Access and Affordability of Medicines in Malaysia: Need for a National Pricing Policy," Applied Health Economics and Health Policy, Springer, vol. 17(5), pages 641-654, October.

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    More about this item

    Keywords

    Modified Structure-Conduct-Performance; Pharmaceutical Industry; Competition; Panel Regression; Panel Causality;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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