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Barriers to Entry and Profitability

Diana Heger and Kornelius Kraft ()

No 08-071, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Barriers to entry are regarded as major impediments to the working of markets. Entry must not necessarily actually take place - the perceived threat of entry may encourage incumbent firms to behave as if they are in a competitive market, even if they are not. We present empirical evidence on effects of perceived threat of entry on profitability. Using information from managers about how they assess the existence of entry barriers a strong impact of these assessments on profitability is confirmed. The number and the relative size of competitors also exert considerable effects. We find no statistically significant relation between the perceived threat of entry and the actual number of firms if the size of the relevant market is taken into account.

Keywords: Barriers to Entry; Profitability; Discrete Regression Models (search for similar items in EconPapers)
JEL-codes: C25 L25 L13 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-com, nep-ent, nep-ind and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:7414

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