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Market Growth, Economies of Scale, and Plant Size in the Chemical Processing Industries

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  • Lieberman, Marvin B

Abstract

What factors determine the size of new industrial plants? This study uses data on twenty-tw o chemical products to test alternative models of capacity expansion, including the Manne model and a "scale frontier" model. The empiri -cal results strongly support the scale frontier model: the size of n ew plants increased along a time trend that was unrelated to market c oncentration, market growth, or the magnitude of investment scale eco nomies. Entrants typically built smaller plants than incumbents, but all firms built plants closer to the technological frontier when smal l plants carried a higher relative cost penalty. Copyright 1987 by Blackwell Publishing Ltd.

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  • Lieberman, Marvin B, 1987. "Market Growth, Economies of Scale, and Plant Size in the Chemical Processing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 175-191, December.
    • Handle: RePEc:bla:jindec:v:36:y:1987:i:2:p:175-91
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    Cited by:

    1. Rajagopalan, S. & Yu, Hung-Liang, 2001. "Capacity planning with congestion effects," European Journal of Operational Research, Elsevier, vol. 134(2), pages 365-377, October.
    2. Philip Metzger, 2023. "Economics of In-Space Industry and Competitiveness of Lunar-Derived Rocket Propellant," Papers 2303.09011, arXiv.org.
    3. Sampath Rajagopalan & Medini R. Singh & Thomas E. Morton, 1998. "Capacity Expansion and Replacement in Growing Markets with Uncertain Technological Breakthroughs," Management Science, INFORMS, vol. 44(1), pages 12-30, January.
    4. Bergman, Mats & Johansson, Per, 2000. "Strategic Investments in the Pulp and Paper Industry: A Count Data Regression Analysis," Umeå Economic Studies 536, Umeå University, Department of Economics.
    5. Parra, David & Zhang, Xiaojin & Bauer, Christian & Patel, Martin K., 2017. "An integrated techno-economic and life cycle environmental assessment of power-to-gas systems," Applied Energy, Elsevier, vol. 193(C), pages 440-454.
    6. Bradley, James R., 2005. "Optimal control of a dual service rate M/M/1 production-inventory model," European Journal of Operational Research, Elsevier, vol. 161(3), pages 812-837, March.
    7. Bellak, Christian, 1992. "Towards A Flexible Concept of Competitiveness," Department of Economics Working Paper Series 13, WU Vienna University of Economics and Business.
    8. Truett, Dale B. & Truett, Lila J., 1998. "Production, cost, and input substitution in the Mexican petroleum industry," The North American Journal of Economics and Finance, Elsevier, vol. 9(1), pages 67-87.
    9. Polasky, Stephen & Mason, Charles F., 1998. "On the welfare effects of mergers: Short run vs. long run," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(1), pages 1-24.
    10. Karaomerlioglu, Dilek Cetindamar, 1997. "The impact of process control technology on Turkish chemical industry," International Journal of Production Economics, Elsevier, vol. 53(3), pages 307-321, December.
    11. Jain, Tarun & Hazra, Jishnu, 2017. "Dual sourcing under suppliers' capacity investments," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 103-115.
    12. Jenkins, Timothy L. & Sutherland, John W., 2014. "A cost model for forest-based biofuel production and its application to optimal facility size determination," Forest Policy and Economics, Elsevier, vol. 38(C), pages 32-39.

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