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Concentration, Product Variety, and Entry-for-Merger: Evidence from New Product Introductions in the U.S. Food Industry

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  • Haimanti Bhattacharya
  • Robert Innes

Abstract

Competing theories in industrial organization predict that more concentrated industries will lead to a smaller and more efficient variety of products or, alternately, a larger and less efficient array of products. This paper presents an empirical study of these competing implications that estimates the impact of market concentration on new product introductions in a panel of nine food processing industries over 1983 to 2004. Controlling for industry-level unobservables (using fixed effects) and endogeneity of industry market structure, we find that industry concentration promotes the introduction of new products. Preliminary evidence also suggests that new product introductions spur subsequent food industry mergers. Both conclusions are consistent with the “entry-for-merger” theory of product variety wherein atomistic innovators introduce new products in anticipation of profitable future mergers with concentrated firms.

Suggested Citation

  • Haimanti Bhattacharya & Robert Innes, 2016. "Concentration, Product Variety, and Entry-for-Merger: Evidence from New Product Introductions in the U.S. Food Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(5), pages 1360-1376.
    • Handle: RePEc:oup:ajagec:v:98:y:2016:i:5:p:1360-1376.
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    Cited by:

    1. Sylvie Bonny, 2017. "Corporate Concentration and Technological Change in the Global Seed Industry," Sustainability, MDPI, vol. 9(9), pages 1-25, September.

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    More about this item

    Keywords

    Market concentration; mergers; new product introductions;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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