INNOVATION AND MARKET STRUCTURE: AN EMPIRICAL EVALUATION OF THE ‘BOUNDS APPROACH’ IN THE CHEMICAL INDUSTRY*

Pedro L. Marín and Georges Siotis

Journal of Industrial Economics, 2007, vol. 55, issue 1, 93-111

Abstract: This paper applies Sutton's [1998]‘bounds approach’ to the chemical industry. The approach predicts that (i) the lower bound of the ratio of the 1‐firm concentration index to product concentration is bounded away from zero at high levels of product concentration only in high R&D markets and (ii) the lower bound on market concentration is higher and increasing in product concentration in markets with higher R&D intensities. We test these two hypotheses and find that the data strongly support them. A novel feature of our analysis is the use of plant level data in defining products and the classification of products into markets based on end‐use.

Date: 2007
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https://doi.org/10.1111/j.1467-6451.2007.00304.x

Related works:
Working Paper: Innovation and Market Structure: An Empirical Evaluation of the 'Bounds Approach' in the Chemical Industry (2002)
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