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The Impact of size and group affiliation in emerging markets: A Cost efficiency analysis of Indian firms

Author

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  • Ramesh Jangili

    (Indira Gandhi Institute of Development Research
    Institute of Economic Growth)

Abstract

Despite strengthening market discipline and improving overall competition, emerging markets, like India, still have severe information problems. Large firms and group firms in these markets have the potential to gain differential advantage as well as destroy value. We analyse the cost efficiency performance of firms in India: the degree of cost efficiency with respect to firm size and the cost efficiency of firms affiliated to business groups with that of standalone firms. We find that as firm size increases the degree of cost efficiency decreases and standalone firms exhibit better cost efficiency scores when compared with that of group affiliated firms. This supports the view that firms having either market power or involved in explicit or implicit form collusion incur higher costs. Alternatively, firms which do not have market power minimises the cost in a better way.

Suggested Citation

  • Ramesh Jangili, 2019. "The Impact of size and group affiliation in emerging markets: A Cost efficiency analysis of Indian firms," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2019-036, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2019-036
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2019-036.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ramesh Jangili, 2020. "Profitability in emerging markets: Efficiency or market power? A Study of Indian firms," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-003, Indira Gandhi Institute of Development Research, Mumbai, India.

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    More about this item

    Keywords

    Cost Efficiency; Size; Group Affiliation; Stochastic Frontier Analysis;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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