Product Differentiation, Industry Concentration and Market Share Turbulence

Catherine Anne Matraves () and Laura Rondi

International Journal of the Economics of Business, 2007, vol. 14, issue 1, pages 37-57

Abstract: Building on the current theory of industrial concentration, we analyze the relation between market size and product differentiation, and show how product differentiation impacts market share turbulence. We first propose that in markets where vertical product differentiation dominates, firms will have an incentive to escalate investment in advertising and/or R&D as market size increases. Secondly, such (firm-specific) investments will make competitive advantage more sustainable as the firm is less imitable. This will not be the case if the market is primarily characterized by homogeneous products or horizontal product differentiation. Our predictions are tested using an original EU dataset for 1987 and 1997. Our results strongly support our predictions - the degree of market share turbulence increases with market size. However, this relation is weakened by competitive investment in advertising and R&D.

Keywords: Product Differentiation; Market Size; Turbulence (search for similar items in EconPapers)
Date: 2007
View citations in EconPapers

Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Product Differentiation, Industry Concentration and Market Share Turbulence (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:taf:ijecbs:v:14:y:2007:i:1:p:37-57

Ordering information: This journal article can be ordered from
http://www.tandf.co.uk/journals/subscription.html

Access Statistics for this article

International Journal of the Economics of Business is edited by Eleanor Morgan and H.E. Frech

More articles in International Journal of the Economics of Business from Taylor and Francis Journals
Series data maintained by Christopher F. Baum ().