Strengthening the Competitiveness of Thai Firms: What Needs to be Done?

Kiatipong Ariyapruchya, Cheerapan O-lanthanasate and Chatsurang Karnchanasai
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Kiatipong Ariyapruchya: Bank of Thailand
Cheerapan O-lanthanasate: Bank of Thailand
Chatsurang Karnchanasai: Bank of Thailand

No 2006-03, Working Papers from Monetary Policy Group, Bank of Thailand

Abstract: This paper examines the empirical relationship between productmarket competition and firm productivity. Using a rich panel data set of Thai manufacturing firms, we estimate firm total factor productivity and measures of product-market competition such as economic capital rent, price dispersion, market concentration and market entry paperwork. We find that increased product-market competition encourages firm efficiency. Product market competition can also engender productivity growth and innovation. Young firms tend be more efficient and invest more in physical capital and research, reflecting the importance of fluid markets and creative destruction to economic growth. The challenge for policymakers will be how to harness the forces of market competition to ensure that the firm sector, as a whole, can raise its productivity and adapt to rising competition. We discuss how the appropriate competition policy can also serve to encourage innovation, which will become increasingly important to Thailand’s long-run prosperity as the Thai economy exhausts the gains from factor accumulation and imitation and moves toward becoming a knowledge-based economy.

Pages: 39 pages
Date: 2006-03
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Citations: View citations in EconPapers (2)

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