IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/17076.html
   My bibliography  Save this paper

A Compositional Data Analysis of Market Share Dynamics

Author

Listed:
  • ARATA Yoshiyuki
  • ONOZAKI Tamotsu

Abstract

The existing literature has shown that there are several statistical regularities in industrial dynamics, which are an important clue to understanding the underlying mechanism. This paper focuses on market share changes and shows that its distribution has some remarkable properties. Because of the constrained nature of market share, namely, the sum must be unity, this paper applies the recently developed method called compositional data analysis (CDA) to market share data. We find the distribution does not follow a Gaussian but instead a tent-shaped distribution with a fatter tail, which is closely related with the findings of firm growth rate distribution. With some exceptions, this statistical feature can be observed across different sectors. Furthermore, this property can be observed when we focus on the relation between the top subgroup and lower-ranked firms. This distribution shape implies that market share growth cannot be described by an accumulation of small shocks. Rather, lumpy jumps that transform the market structure are crucial in market share dynamics. Put differently, radical change in market structure is a relatively frequent phenomenon. Such implications based on statistical properties of observed data help us further investigate industrial dynamics theoretically.

Suggested Citation

  • ARATA Yoshiyuki & ONOZAKI Tamotsu, 2017. "A Compositional Data Analysis of Market Share Dynamics," Discussion papers 17076, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:17076
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/17e076.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Giovanni Dosi & Marcelo C. Pereira & Maria Enrica Virgillito, 2017. "The footprint of evolutionary processes of learning and selection upon the statistical properties of industrial dynamics," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(2), pages 187-210.
    2. Mariana Mazzucato & Stuart Parris, 2015. "High-growth firms in changing competitive environments: the US pharmaceutical industry (1963 to 2002)," Small Business Economics, Springer, vol. 44(1), pages 145-170, January.
    3. Giulio Bottazzi & Alex Coad & Nadia Jacoby & Angelo Secchi, 2011. "Corporate growth and industrial dynamics: evidence from French manufacturing," Applied Economics, Taylor & Francis Journals, vol. 43(1), pages 103-116.
    4. Kaplow, Louis, 2015. "Market definition, market power," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 148-161.
    5. John Sutton, 2007. "Market Share Dynamics and the "Persistence of Leadership" Debate," American Economic Review, American Economic Association, vol. 97(1), pages 222-241, March.
    6. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 255-294, May.
    7. Giulio Bottazzi & Angelo Secchi, 2006. "Explaining the distribution of firm growth rates," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 235-256, June.
    8. Masatoshi Kato & Yuji Honjo, 2006. "Market Share Instability and the Dynamics of Competition: a Panel Data Analysis of Japanese Manufacturing Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(2), pages 165-182, March.
    9. Giovanni Dosi & Marco Grazzi & Luigi Marengo & Simona Settepanella, 2016. "Production Theory: Accounting for Firm Heterogeneity and Technical Change," Journal of Industrial Economics, Wiley Blackwell, vol. 64(4), pages 875-907, December.
    10. Giulio Bottazzi & Elena Cefis & Giovanni Dosi, 2002. "Corporate growth and industrial structures: some evidence from the Italian manufacturing industry," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(4), pages 705-723, August.
    11. Geroski, P. A. & Toker, S., 1996. "The turnover of market leaders in UK manufacturing industry, 1979-86," International Journal of Industrial Organization, Elsevier, vol. 14(2), pages 141-158.
    12. Mariana Mazzucato, 2002. "The PC Industry: New Economy or Early Life-Cycle?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 318-345, April.
    13. Alex Coad, 2009. "The Growth of Firms," Books, Edward Elgar Publishing, number 13424.
    14. Jane Fry & Tim Fry & Keith McLaren, 2000. "Compositional data analysis and zeros in micro data," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 953-959.
    15. Fry, Jane M. & Fry, Tim R. L. & McLaren, Keith R., 1996. "The stochastic specification of demand share equations: Restricting budget shares to the unit simplex," Journal of Econometrics, Elsevier, vol. 73(2), pages 377-385, August.
    16. Louis Kaplow, 2015. "Market Definition, Market Power," NBER Working Papers 21167, National Bureau of Economic Research, Inc.
    17. G. Bottazzi & E. Cefis & G. Dosi & A. Secchi, 2007. "Invariances and Diversities in the Patterns of Industrial Evolution: Some Evidence from Italian Manufacturing Industries," Small Business Economics, Springer, vol. 29(1), pages 137-159, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jakub Growiec & Fabio Pammolli & Massimo Riccaboni, 2020. "Innovation and Corporate Dynamics: A Theoretical Framework," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 12(1), pages 1-45, March.
    2. Arata, Yoshiyuki, 2019. "Firm growth and Laplace distribution: The importance of large jumps," Journal of Economic Dynamics and Control, Elsevier, vol. 103(C), pages 63-82.
    3. Alex Coad & Werner Hölzl, 2012. "Firm Growth: Empirical Analysis," Chapters, in: Michael Dietrich & Jackie Krafft (ed.), Handbook on the Economics and Theory of the Firm, chapter 24, Edward Elgar Publishing.
    4. Matthias Duschl & Thomas Brenner, 2013. "Characteristics of regional industry-specific employment growth rates' distributions," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 249-270, June.
    5. Thomas Brenner & Matthias Duschl, 2014. "Modelling Firm and Market Dynamics - A Flexible Model Reproducing Existing Stylized Facts," Working Papers on Innovation and Space 2014-07, Philipps University Marburg, Department of Geography.
    6. Thomas Brenner & Matthias Duschl, 2018. "Modeling Firm and Market Dynamics: A Flexible Model Reproducing Existing Stylized Facts on Firm Growth," Computational Economics, Springer;Society for Computational Economics, vol. 52(3), pages 745-772, October.
    7. Alessandra Colombelli & Jackie Krafft & Francesco Quatraro, 2015. "Eco-innovation and Firm Growth: Do Green Gazelles Run Faster? Microeconometric Evidence from a Sample of European Firms. WWWforEurope Working Paper No. 88," WIFO Studies, WIFO, number 57897.
    8. Colombelli, Alessandra & Haned, Naciba & Le Bas, Christian, 2013. "On firm growth and innovation: Some new empirical perspectives using French CIS (1992–2004)," Structural Change and Economic Dynamics, Elsevier, vol. 26(C), pages 14-26.
    9. Alex Coad, 2006. "Understanding the processes of firm Growth - a closer look at serial growth rate correlation," Cahiers de la Maison des Sciences Economiques r06051, Université Panthéon-Sorbonne (Paris 1).
    10. Daria Ciriaci & Pietro Moncada-Paternò-Castello & Peter Voigt, 2016. "Innovation and job creation: a sustainable relation?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(2), pages 189-213, August.
    11. Giovanni Dosi & Emanuele Pugliese & Pietro Santoleri, 2017. "Growth and survival of the `fitter'? Evidence from US new-born firms," LEM Papers Series 2017/06, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    12. Alessandra Colombelli & Francesco Quatraro, 2014. "The persistence of firms' knowledge base: a quantile approach to Italian data," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 23(7), pages 585-610, October.
    13. Jerker Denrell & Christina Fang & Chengwei Liu, 2015. "Perspective—Chance Explanations in the Management Sciences," Organization Science, INFORMS, vol. 26(3), pages 923-940, June.
    14. Alessandra Colombelli & Jackie Krafft & Francesco Quatraro, 2015. "Eco-innovation and firm growth: Do green gazelles run faster? Microeconometric evidence from a sample of European firms," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201516, University of Turin.
    15. Schneck, Stefan, 2018. "Times are a changin'? The emergence of new firms and rank persistence," Working Papers 01/18, Institut für Mittelstandsforschung (IfM) Bonn.
    16. Colombelli Alessandra & Quatraro Francesco, 2012. "Persistence of innovation and knowledge structure: Evidence from a sample of Italian firms," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201205, University of Turin.
    17. Joel Rabinovich, 2022. "The evolving contribution of R&D, advertising and capital expenditures for US-listed firms’ growth in sales, 1979-2018. A quantile regression analysis," Working Papers hal-03539656, HAL.
    18. Goedhuys-Degelin M.D.L. & Sleuwaegen L., 2015. "Human capital, innovation and the distribution of firm growth rates," MERIT Working Papers 2015-013, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    19. Alex Coad & Marc Cowling & Josh Siepel, 2017. "Growth processes of high-growth firms as a four-dimensional chicken and egg," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(4), pages 537-554.
    20. Daria Ciriaci & Pietro Moncada-Paternò-Castello & Peter Voigt, 2012. "Does size or age of innovative firms affect their growth persistence? -Evidence from a panel of innovative Spanish firms-," JRC Working Papers on Corporate R&D and Innovation 2012-03, Joint Research Centre.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:17076. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.