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Growth Response to Competitive Shocks: Market Structure Dynamics Under Liberalisation - the Case of India

Listed author(s):
  • Uma S. Kambhampati
  • Paul A. Kattuman

Liberalisation transforms market structures through the behavioural responses of incumbent firms and entrants, large firms and small, to enhanced freedom of choice. Change in market share volatility, and change in the effective agility of small and large firms underpin changes in market structure. We analyse these processes for Indian manufacturing industries over the 18-year period from 1980, spanning the domestic liberalisation of 1985 and the more comprehensive reforms of 1991, using a data set of large and medium firms in 83 industries. We find that while market structures themselves appeared to change little, turbulence in market shares, as well as the way growth is related to size responded markedly, differing in direction and magnitude, depending on whether the liberalisation was partial and domestic, or comprehensive. We find that they tended to offset each other, leading to little visible change in market structure itself. We also find that while drivers of market structure traditionally recognised in industrial organisation studies had significant impacts on both components of concentration change, their dynamics are captured very well by a parsimonious model that has just the announcement effects - the reform dates.

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Paper provided by Centre for Business Research, University of Cambridge in its series Working Papers with number wp263.

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Date of creation: Jun 2003
Handle: RePEc:cbr:cbrwps:wp263
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  1. Rakesh Basant & Pankaj Chandra, 2002. "Building Technological Capabilities In A Liberalising Developing Economy: Firm Strategies And Public Policy," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(4-5), pages 399-421.
  2. S. W. Davies & Paul A. Geroski, 2000. "Changes In Concentration, Turbulence, And The Dynamics Of Market Shares," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 383-391, August.
  3. Ghemawat, Pankaj & Khanna, Tarun, 1998. "The Nature of Diversified Business Groups: A Research Design and Two Case Studies," Journal of Industrial Economics, Wiley Blackwell, vol. 46(1), pages 35-61, March.
  4. Rakesh Basant & Pankaj Chandra, 2002. "Building technological capabilities in a liberalising developing economy: Firm strategies and public policy," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(6), pages 1-23.
  5. Kumar, Nagesh, 1990. "Mobility Barriers and Profitability of Multinational and Local Enterprises in Indian Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 38(4), pages 449-463, June.
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