Industrial Life Cycle,Market Concentration And Economic Performance

The paper concentrates on two key points related to market concentration and economic performance of industrial organization theory:(1)Whether the different life cycle of the industry directly affects the economic performance of the industry?(2)Are different industries with different lifecycles able to adjust the impact of market concentration on economic performance? The paper introduces the new theoretical model and explains how such a theoretical model can play a role in the actual industry organization to answer these two questions.All along,the concentration of industry is the focus of the governments,industries and economists including China.In theoretical research,there are three hypotheses about the relationship between industrial concentration and economic performance: structural performance hypothesis,relative market power hypothesis and efficiency structure hypothesis.But the core of these three hypotheses did not reach an agreement.The core view of structural performance hypothesis is that the size of industrial performance is determined by market forces.Compared with the low concentration of the market,high concentration of the market structure is not conducive to the full competition between its internal enterprises,and large-scale enterprises are more likely to rely on their own monopoly to manipulate or raise the price of goods to obtain excess profits.Similar to structural performance hypothesis,relative market power hypothesis considers that the output of large-scale,high degree of product differentiation,and the enterprises that sharing large market have the ability to use monopoly to earn high profits.Unlike the first two hypotheses,efficiency structure hypothesis considers that the key factor in the difference between profitability and market concentration is the efficiency difference between firms,and the relationship between market concentration and performance is not true.X-efficiency theory considers that enterprises,which have a high research and development capability,technical level and advanced management experience,its production costs will be with the technical and management level to further reduce,and this is the root cause of higher profits.Higher profits will continue to be put into the next phase of the introduction of research and development and technology to expand the scale of production to earn more profits,and increasing efficiency caused by a virtuous circle of enterprise market share gradually increases.Ultimately,the market concentration is also increased accordingly.In empirical test,there is a big difference in the relationship between industrial concentration and economic performance.Some scholars believe that there is a positive correlation between market concentration and economic performance,and this positive correlation is caused by the existence of large-scale corporate monopoly power,which supports structural performance hypothesis of Harvard School.But some scholars believe that this positive correlation is due to the existence of high efficiency,which supports the efficiency structure hypothesis The Chicago School.There are also some scholars that do not support the neither Harvard School nor the Chicago School,and their conclusion shows that there is no necessary relationship or negative correlation between market concentration and economic performance.In formulating policy,the policy implications of market power hypothesis and efficiency structure hypothesis are counterproductive.If the empirical results of the data test support the market power hypothesis,then the policy should support antitrust policy,and its results will lead to reduced market concentration;if the evidence supports the efficiency structure hypothesis,it cannot simply take antitrust measures.The reason is that if the former is correct,then the increase in concentration will exacerbate the monopoly of the phenomenon,resulting in greater loss of social welfare;and if the latter is correct,then the concentration of the increase is the natural outcome of market competition,and did not bring the loss of social welfare.China's current status of most of the industry is low rate of concentration(China's not weighted industrial concentration of CR4 in about 20% and the United States not weighted industrial concentration CR4 in about 40%),while the rate of efficiency is low,too.In this case,some of the most important issues arise.In view of China's current industrial development status,we should take anti-monopoly policy in the end,or should encourage mergers and acquisitions to expand the scale of the enterprise? What is the relationship between industry concentration and performance? Are the development and implementation of different industrial development policies not to be static?With above questions,We first sum up the domestic and foreign literature on market concentration and economic performance,and sum up the current academic community for market concentration and economic performance of the relationship between the focus of debate;the teasing of the development process and division method of industrial life cycle,the understanding of the causes of the industrial life cycle and industries in different life cycle presented by the characteristics,and how to measure the industry's life cycle more accurately and effectively.On the basis of literature review,through the theoretical analysis,and the relevant hypothesis is put forward,the paper is divided into nine hypotheses.Firstly,on the impact of market concentration on economic performance factors,we summarize the four aspects,namely,specialized division of labor,economies of scale,scope of economy and research and development innovation.On this basis,this paper puts forward hypothesis 1: there is a correlation between market concentration and economic performance,and its direction is positive.Secondly,on the direct impact of the industrial life cycle on economic performance,this paper summarizes the differences between the rules of entry,exit,market structure and innovation and the technological progress from the period of formation to the recession.With the development of time,the profit curve of the whole industry.On this basis,this paper puts forward hypothesis 2: assuming 2a,there is a positive correlation between the size of the formation period and the economic performance;assuming 2b,the scale of growth is positively related to economic performance;assuming 2c,there is a positive correlation between 2c,stable size and economic performance;assuming 2d,there is a positive correlation between the size of the recession and the economic performance.Thirdly,the impact of how the industrial life cycle adjusts market concentration on economic performance.Based on the theory of industrial evolution,this paper analyzes the changes of market concentration on market performance in different backgrounds of industrial life cycle by introducing the concept of adjustment variables and adjustment effect.On this basis,this paper puts forward hypothesis 3: assuming 3a,the scale of the formation period is negative for the regulation of market concentration and economic performance;assuming 3b,the scale of the growth period is negative for the regulation of market concentration and economic performance;assuming 3c,the scale of the stabilization period is positive for the market concentration and the economic performance adjustment;assuming 3d,the size of the recession is positive for market concentration and economic performance.The formulation of the above assumptions laid a solid theoretical foundation for the writing of subsequent chapters.Then,based on the data of 493 sub-sectors in the "China Economic Census Yearbook" in 2004,2008 and 2013 and the data of the corresponding year "China Industrial Enterprise Database",the article does empirical analysis of the above theoretical analysis and assumptions.The empirical results show that the impact of market concentration and growth on market performance is not significant,and there is a significant positive correlation between stabilization and recession,which indicates that in the first two stages of the industrial life cycle to expand the scale of the industry's does not impact the performance significantly.But when the industry into a stable period and recession period,the appropriate expansion of the scale of the industry can enhance the industry's performance effectively;forming period and growth period has a significant negative regulation effect,and in the stability and recession period,this effect becomes not obvious,which further reveals that the industrial life cycle not only directly affects the performance of the industry,but also plays a significant role in regulating the relationship between market concentration and economic performance.Finally,through the analysis of two pillar industries for china-the automobile industry and the steel industry,do the robustness test to the entire theoretical model and the results to see whether the overall model of the statistical significance of the individual industry is useful on the one hand,in other words,whether the general conclusions of the article are pacific.And put forward to promote China's automobile and steel industry development countermeasures and suggestions on the other hand.The paper's study draws four main conclusions.First,the market concentration and economic performance is positively related,and that is to improve market concentration will help improve economic performance.Second,the industrial life cycle has a direct impact on economic performance,industrial economic performance changes regularly with the industry's life cycle.Third,the industrial life cycle will significantly adjust the impact of market concentration on economic performance.Fourth,the formulation and implementation of industrial policy should take full account of the industrial life cycle which is an important factor.The relationship between traditional market concentration and economic performance implies a hypothesis that the industry's life cycle is constant.The paper expands the theory of industrial organization and the theory of industrial life cycle,and reveals the changes in the impact of market concentration on performance in the formation,growth,stabilization and recession of industrial development,which provides a new perspective for the subsequent research on industrial organization theory.At the same time,the paper combines the evolution of economic thinking and industrial organization theory of organic,and divides the impact of market concentration on economic performance into the role of promoting and hinder.And this paper believes that in different cycles,the final result of the impact of market concentration on economic performance is the result of mutual offsetting to distinguish the analysis of previous single and multiple industries.By doing so,the results are closer to reality and provide more details on how market concentration affects industrial economic performance.The study of the paper provides new empirical evidence to understand the structure and performance in the transition economy.In promoting the development of relevant theories,there are certain impacts on the formulation and implementation of industrial policy.