A New Framework Of Industrial Organization Analysis Based On S-C-P Paradigm

Since the establishment of Harvard School's S-C-P paradigm, the theories of industrial organization have reached the diverse and developing stages under the "Harvard Traditional Theory". However, in this famous "S-C-P" paradigm, we at least face two embarrassing problems: The first is the hypotheses of market structure (we divide market into 4 types: complete competition, monopoly, oligopolistic monopoly, and monopolistic competition). Because distinctive differences exist in the most industries, it is inevitable to find those hypotheses unrealistic. The second is oversimplification of industrial organization theory in its applications. For example, Scholars have done more research on economic regulation by analyzing market structure and performance than on firm behaviors. As a result, it's rare to get useful conclusions on both firm and industry. So the author believes that it is necessary to make some adjustments to the traditional paradigm.Since 1990s, the globalization of economy has been accelerating, technological innovation speeding up, and consumers' demand changing. All these have forced the research focus shift from the outside market environment to the inside firm's structure. Meanwhile, the uprising of Neo-institution Economics, Information Economics, and Game Theory has brought new thoughts into the inside of the firms. They analyze the relationship between firm's behaviors and market performance by observing the impacts of the changes of firm's property and its industrial structure.The unsolved problems of S-C-P paradigm and the changed research focus combined make the author try to set up a new framework of industrial organization theory to analyze firm's core competence. This new framework is based on traditional S-C-P paradigm, but absorbs breakthroughs in Firm Theory. The purpose of introducing this framework, which is the combined result of industrial organization theory and firm's strategy theory, is to solve the problems of the old paradigm and seek a new way to research. In this article, the author incorporates three elements into the new framework: Corporation Structure, Market Environment, and Core Competence. The author believes that market competition comes from the strength of firm's core competence and that competence determines the firm's sustainable development.