Growth Response to Competitive Shocks: Market Structure Dynamics Under Liberalisation - the Case of India

Uma Kambhampati and Paul A. Kattuman

Working Papers from Centre for Business Research, University of Cambridge

Abstract: Liberalisation transforms market structures through the behavioural responses of incumbent firms and entrants, large firms and small, to enhanced freedom of choice. Change in market share volatility, and change in the effective agility of small and large firms underpin changes in market structure. We analyse these processes for Indian manufacturing industries over the 18-year period from 1980, spanning the domestic liberalisation of 1985 and the more comprehensive reforms of 1991, using a data set of large and medium firms in 83 industries. We find that while market structures themselves appeared to change little, turbulence in market shares, as well as the way growth is related to size responded markedly, differing in direction and magnitude, depending on whether the liberalisation was partial and domestic, or comprehensive. We find that they tended to offset each other, leading to little visible change in market structure itself. We also find that while drivers of market structure traditionally recognised in industrial organisation studies had significant impacts on both components of concentration change, their dynamics are captured very well by a parsimonious model that has just the announcement effects - the reform dates.

Keywords: Liberalisation; Competitive Shocks; Firm growth; Turbulence; Market structure; India (search for similar items in EconPapers)
JEL-codes: C21 C22 L19 L60 (search for similar items in EconPapers)
Date: 2003-06
New Economics Papers: this item is included in nep-ent and nep-mac
Note: PRO-1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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