How much does industry matter in an emerging market economy?

Arnab Bhattacharjee and Sumit K Majumdar ()

No 256, Dundee Discussion Papers in Economics from Economic Studies, University of Dundee

Abstract: Theories of firm profitability make different predictions about the relative importance of firm, industry and time specific factors. We assess, empirically, the relevance of these effects over a sixteen year period in India, as a regime of control and regulation, pre 1985, gave way to partial liberalisation between 1985 and 1991 and to more decisive liberalisation after 1991. We find that firm effects are important throughout, when rent seeking opportunities proliferated, as well as when competitive forces were enhanced by institutional change. In contrast, industry effects significantly increased after liberalisation, suggesting that industry structure matters more within competitive markets. These findings help understand the relevance of different models over different stages of liberalisation, and have important implications for both theory and policy.

Keywords: Firm profitability; Market structure; Firm and industry effects; Time effects; Institutional change; Transition economy (search for similar items in EconPapers)
JEL-codes: C33 D21 L13 L16 L25 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2011-06
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Working Paper: How much does industry matter in an emerging market economy? (2011)
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