The Determinants Of Entry And Exit In China Manufacturing Industries

Entry and exit are important concepts in industrial organization, which combine enterprise, industry and market. The classic theory of industrial organization points that the free entry and exit can have positive effect on improving market performance. So, economist attaches big importance on the empirical study of entry and exit. In practice, analyzing the determinants of entry and exit can provide theoretical reference for government's industrial policy from micro-economical aspect. In theory, empirical studies on china enterprise's entry behavior are quite few and we haven't found the empirical studies on exit. Using cross-section data of 153 China manufacturing industries in 2004, this paper conducts an empirical analysis examining the entry and exit factors in China's manufacturing industries.The paper includes five parts. Part one is the theoretical and practical background of this paper. The second part reviews the existing empirical studies on entry and exit; on the whole, there are many empirical studies of entry and exit in developed countries, but there are few papers on this study in China. The third part sets the empirical model and introduces the source of data. In section four, the paper tells the empirical results and conducts related analysis. At last, we have our conclusion and findings.The characteristics of this paper are as follows: firstly, the sample is 3-digital cross-section data of 153 China manufacturing industries in 2004, thus including more industries; secondly, this paper conducts individual empirical study on both entry and exit, and we also empirically examine the hypothesis that there is a symmetrical relationship between entry and exit barriers; thirdly, our empirical equation includes the general variables such as capital intensity, market concentration and advertisement intensity, which can better our analysis on entry and exit and can compare our results with existing studies; fourthly, we have the hypothesis that the effect of state- owned economy (SOE) on entry and exit are not simple linear, and we try to examine the nonlinear relationship between them, at the same time, we divided our sample into two groups on the basis of the share of SOE and test the effects of different parts.We particularly focus on the effect of state- owned economy (SOE) on entry and exit. The empirical result shows that there is an unlinear relationship between entry and the share of SOE. What's more, we find that the state-owned economy is not be the entry barrier in industries with a relatively higher share of SOE and it is the structural barriers, e.g. absolute cost barriers, that reduce entry; however, such effect is significant in industries with a relatively lower share of SOE. Contrary to the existing studies, our result proves that SOE has a significantly positive effect on exit.