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How much does industry matter in an emerging market economy?

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  • Arnab Bhattacharjee
  • Sumit K. Majumdar

Abstract

Theories of firm profitability make different predictions about the relative importance of firm, industry and time specific factors. We assess, empirically, the relevance of these effects over a sixteen year period in India, as a regime of control and regulation, pre 1985, gave way to partial liberalisation between 1985 and 1991 and to more decisive liberalisation after 1991. We find that firm effects are important throughout, when rent seeking opportunities proliferated, as well as when competitive forces were enhanced by institutional change. In contrast, industry effects significantly increased after liberalisation, suggesting that industry structure matters more within competitive markets. These findings help understand the relevance of different models over different stages of liberalisation, and have important implications for both theory and policy.

Suggested Citation

  • Arnab Bhattacharjee & Sumit K. Majumdar, 2011. "How much does industry matter in an emerging market economy?," Dundee Discussion Papers in Economics 256, Economic Studies, University of Dundee.
  • Handle: RePEc:dun:dpaper:256
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    2. Muhammad Azeem Qureshi & Fred H. Strønen & Marius Tyseng & Marius Urdal, 2020. "Sustainable Business in Norway: The Firm or the Industry Effect?," Sustainability, MDPI, vol. 12(8), pages 1-13, April.

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    More about this item

    Keywords

    Firm profitability; Market structure; Firm and industry effects; Time effects; Institutional change; Transition economy;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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