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Industrial Organization and Export Competitiveness of U.S. Food Manufacturers

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  • Henderson, Dennis R.
  • Frank, Stuart D.

Abstract

Domestic income multipliers associated with U.S. exports of processed and other high-value agricultural products such as meats and manufactured foods are shown to be about 55 percent greater than those for exports of primary agricultural commodities such as grains and oilseeds. About 90 percent of the high-value product exports originate in the food manufacturing industries. Yet, when expressed in terms of export propensity, the external market performance of U.S. food manufacturers trails substantially behind that of similar industries in other countries. The U.S. food manufacturing industries are characterized by competitive imperfections such as product differentiation, scale economies, and seller concentration. Traditional international trade theories based on factor endowment constructs have not proved robust in explaining trade flows under such imperfectly competitive conditions. Recently some economists have applied industrial organization concepts to international markets that are imperfectly competitive. Linkages have been established both between elements of imperfect competition and external market performance, and between international trade and economic welfare in imperfectly competitive markets. This paper reports on an industrial organization-based analysis of the export market performance of U.S. food manufacturers. The analysis utilizes panel data from 78 leading food processing firms and cross-sectional Census data from 42 4-digit SIC food manufacturing industries. Export market performance varies widely among these firms and industries. About 84 percent of the variation was explained through the use of industrial organization characteristics as explanatory variables in regression analysis. Food manufacturer export propensity was found to be significantly and positively related to firm size, research and development, and product transportability, and significantly and negatively related to advertising, vertical coordination in sourcing of raw agricultural commodities, wage rates, and height of foreign import barriers. Other explanatory variables that show promise, pending adequate data, include the extent to which firms operate foreign plants, seller concentration, and investor vs. cooperative firm ownership. Alternative measures of international market performance, including export market share, relative export advantage, and revealed competitiveness, are also examined.

Suggested Citation

  • Henderson, Dennis R. & Frank, Stuart D., 1990. "Industrial Organization and Export Competitiveness of U.S. Food Manufacturers," Occasional Papers 232832, Regional Research Project NC-194: Organization and Performance of World Food Systems.
    • Handle: RePEc:ags:nc194o:232832
    DOI: 10.22004/ag.econ.232832
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    References listed on IDEAS

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    1. Vollrath, Thomas L., 1989. "Competitiveness and Protection in World Agriculture," Agricultural Information Bulletins 309494, United States Department of Agriculture, Economic Research Service.
    2. Marvel, Howard P, 1980. "Foreign Trade and Domestic Competition," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 103-122, January.
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    1. Dennis R. Henderson & Ian M. Sheldon, 1992. "International licensing of branded food products," Agribusiness, John Wiley & Sons, Ltd., vol. 8(5), pages 399-412.
    2. Henderson, Dennis R. & McCorriston, Steve & Sheldon, Ian M., 1993. "Vertical Coordination: Concept, Practice, Theory and Policy Implications for the Agro-Food Sector," Occasional Papers 233157, Regional Research Project NC-194: Organization and Performance of World Food Systems.
    3. Malanoski, Margaret & Handy, Charles & Henderson, Dennis, 1995. "Time Dependent Relationships in U.S. Processed Food Trade and Foreign Direct Investment," Foreign direct investment and processed food trade, March 9-10, 1995 Arlington, Virginia 303404, Regional Research Project NC-194: Organization and Performance of World Food Systems.

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