The Impact Of Market Competition On Total Factor Productivity

The relationship between competition and total factor productivity(hereinafter referred to as TFP)has become one of the central issues in the field of industrial organization(Holmes and Schmitz,2010).For the relationship between the two,two theoretical hypotheses are currently formed: one is the rent dissipation effect hypothesis formed on the basis of the "creative destruction" proposed by Schumpeterian(1942),and the other is based on Arrow(1962).Escape from the competition effect hypothesis.Although both theoretical hypotheses believe that market competition reduces the profitability of enterprises,their understandings of the impact of market competition on TFP are completely different.Specifically,the theory of rent dissipation effect holds that the higher the degree of market competition,the more unfavorable the growth of TFP,because the monopoly rent dissipation caused by market competition will weaken the enthusiasm of enterprises for R&D and innovation.On the contrary,the theory of escaping competition effects holds that market competition will not only reduce the enthusiasm of the enterprise for innovation,but will also motivate the enterprise to innovate,which will help improve the TFP of the enterprise.Many studies often consider only one of the two effects mentioned above(Hashmi,2013;Chen Yanying and Wu Long,2015),but Aghion et al.(2012)demonstrated that these two effects can coexist,and the final impact of competition on TFP Depends on the relative strength of the two effects.At present,research on market competition and TFP rarely considers the heterogeneity of corporate productivity,and there are few explanations for the effect of escaping competition and the effect of rent dissipation.Empirical analysis on these two effects is also lacking.Therefore,this article analyzes the relationship between market competition and TFP based on micro-data of industrial enterprises from 1999 to 2013 based on the heterogeneous perspective of corporate TFP,and uses existing theories to explain and verify.It was found that the relationship between corporate TFP and market competition is non-linear.In some industries,it is a U-curve relationship,and in some industries,it is an inverted U-curve relationship.Moreover,the relationship between the two still has TFP heterogeneity.This is because the level of corporate TFP determines the strength of the effects of escaping competition and rent dissipation.Quantile regression results show that the manufacturing industry has both the effect of escaping competition and the effect of rent dissipation.The heterogeneous TFP of an enterprise does affect the relationship between TFP and market competition,that is,the level of TFP determines the overall effect of the TFP-level enterprise in the environment of increasing market competition,escaping competition and rent dissipation effects.At the same time,it may be due to the heterogeneous TFP of the enterprise.As the TFP quantile level increases,the positive U-shaped and inverted U-shaped relationship curves of TFP and CI shift to the right and left,respectively.Through further empirical analysis,this article also confirms the inferences about the positive U-shaped relationship and the inverted U-shaped relationship curve shifting,because in the same competitive environment,the high-productivity companies face the rent dissipation effect than the low-productivity company.Stronger.In other words,as market competition improves,the rent dissipating effect of high-productivity companies becomes stronger.In addition,among the 16 industries with heterogeneous corporate TFP,most low-productivity companies in7 industries,including beverage manufacturing,and high-productivity companies in 2 industries,including chemical raw materials and chemical product manufacturing,compete with the market.The introduction and enhancement of China's main performance is dominated by escape from competition effects.As for the high productivity enterprises in 7 industries such as the textile industry and the low productivity enterprises in 4 industries such as the chemical fiber manufacturing industry,with the introduction and enhancement of market competition,the main effect is that the rent dissipation effect occupies a dominant position.