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Inter-firm rivalry and firm growth: Is there any evidence of direct competition between firms?

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  • Alex Coad

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  • Mercedes Teruel

Abstract

Inter-firm competition has received much attention in the theoretical literature, but recent empirical work suggests that the growth rates of rival firms are uncorrelated, and that firm growth can be taken as an essentially independent process. We begin by investigating the correlations of the growth rates of competing firms (i.e. the largest and second-largest firms in the same industry) and observe that, surprisingly, the growth of these firms can be taken as independent. Nevertheless, peer-effect regressions, that take into account the simultaneous interdependence of growth rates of rival firms, are able to identify significant negative effects of rivals' growth on a firm's growth.

Suggested Citation

  • Alex Coad & Mercedes Teruel, 2010. "Inter-firm rivalry and firm growth: Is there any evidence of direct competition between firms?," Papers on Economics and Evolution 2010-18, Philipps University Marburg, Department of Geography.
  • Handle: RePEc:esi:evopap:2010-18
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    File URL: ftp://137.248.191.199/RePEc/esi/discussionpapers/2010-18.pdf
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    References listed on IDEAS

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    1. Austan Goolsbee & Chad Syverson, 2008. "How Do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines," The Quarterly Journal of Economics, Oxford University Press, vol. 123(4), pages 1611-1633.
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    Cited by:

    1. Mohamed Amara & AbdelRahmen El Lahga, 2015. "A note on MAR and Jacobs externalities in the Tunisian manufacturing industries," Letters in Spatial and Resource Sciences, Springer, vol. 8(2), pages 151-167, July.
    2. Jacob Holm, 2014. "The significance of structural transformation to productivity growth," Journal of Evolutionary Economics, Springer, vol. 24(5), pages 1009-1036, November.

    More about this item

    Keywords

    Competition; Firm growth; Peer effects econometrics Length 32 pages;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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