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Business group affiliation and product market competition

Author

Listed:
  • Tiago Pinho Pereira

    (Banco de Portugal, University of Porto and CEF.UP)

  • Miguel Sousa

    (University of Porto and CEF.UP)

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.

Suggested Citation

  • Tiago Pinho Pereira & Miguel Sousa, 2024. "Business group affiliation and product market competition," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 51(1), pages 39-72, March.
    • Handle: RePEc:spr:epolin:v:51:y:2024:i:1:d:10.1007_s40812-023-00275-z
    DOI: 10.1007/s40812-023-00275-z
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    More about this item

    Keywords

    Business groups; Entry; Exit; Internal capital markets; Market concentration; Product market competition;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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