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The influence of the concentration on the performance of firms in retail industry in the Republic of Croatia

Author

Listed:
  • Ivan Kristek

    (Sveučilište Josipa Jurja Strossmayera u Osijeku, Ekonomski fakultet u Osijeku)

  • Mladen Pancić

    (Sveučilište Josipa Jurja Strossmayera u Osijeku, Ekonomski fakultet u Osijeku)

  • Hrvoje Serdarušić

    (Sveučilište Josipa Jurja Strossmayera u Osijeku, Ekonomski fakultet u Osijeku)

Abstract

According to SCP paradigm (Structure-Conduct-Performance paradigm) the industry structure affects the behavior of firms in the industry, which affects their performance. The paradigm is consistent with the Neoclassical Theory of the Firm which assumes that there is a direct link between the industry structure, entrepreneurial conduct and performance. The basic principle of this paradigm might be the ability of entrepreneurs to exercise market power in a concentrated industry. High industry concentration is correlated with high profits, especially if the concentration level exceeds a certain critical level under the condition that there are some barriers to entry of new entrepreneurs in the industry. Economic theory supports the view that the industry concentration is in a positive relationship with efficiency, and it can be argued that the growth of industry concentration will increase the efficiency of industry. Current approaches in economic theory and recent empirical studies do not follow the SCP theory, they suggest that the above-average profits, which occur in most concentrated industry’s, are results of economic efficiency and effectiveness, and not a consequence of non-competitive behavior. In this paper we will try to give an answer to the above-mentioned issue present in economic theory. The study will try to demonstrate a statistically significant link between the measure of concentration and measure of efficiency in retail industry in the Republic of Croatia.

Suggested Citation

  • Ivan Kristek & Mladen Pancić & Hrvoje Serdarušić, 2017. "The influence of the concentration on the performance of firms in retail industry in the Republic of Croatia," EFOS Working Papers Series 1701, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia.
    • Handle: RePEc:osi:wpaper:1701
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    References listed on IDEAS

    as
    1. Ivan Kristek, 2009. "Measuring Industry Concentration of Equity Investment Funds in the Republic of Croatia," Interdisciplinary Management Research, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 5, pages 415-423.
    2. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057, Elsevier.
    3. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    4. Michael Salinger, 1990. "The Concentration-Margins Relationship Reconsidered," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990 Micr), pages 287-335.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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