Business group affiliation and product market competition

Tiago Pinho Pereira () and Miguel Sousa ()
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Tiago Pinho Pereira: Banco de Portugal, University of Porto and CEF.UP
Miguel Sousa: University of Porto and CEF.UP

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2024, vol. 51, issue 1, No 2, 39-72

Abstract: Abstract This study provides additional information concerning the influence of business groups on market concentration, entry and exit of recent entrants. Using a wide-ranging dataset from Portugal and industry-level regressions, we show that the presence of business group firms decreases market concentration. In addition, we find a U-shaped relationship between the market share of business group firms and entry. These two findings taken together suggest that business groups compete intensively until reaching a desirable market share, which provokes entry deterrence. Furthermore, our results indicate that entry is not only affected by the market share held by business group firms, but also by the cash held by the business groups of entrant firms particularly, confirming previous research that underlines the importance of internal capital markets on overcoming barriers to entry. Finally, we do not find a significant relationship between business groups and the survival of recent entrants. Data suggests that industry-level variables such as profitability and capital intensity explain the exit of recent entrants better.

Keywords: Business groups; Entry; Exit; Internal capital markets; Market concentration; Product market competition (search for similar items in EconPapers)
JEL-codes: G32 G38 L11 L41 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s40812-023-00275-z

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