This paper investigates the central methodological and substantive controversies surrounding the relationship between concentration and performance which lies at the heart of many strategy content models. We introduce the technique of meta-analysis to evaluate the nature of the relationship and to empirically assess the controversies using existing data. Our findings suggest that the relationship is moderated by industry definition and time period of data and is not affected by methodological artifacts. The implications of the findings are discussed with particular reference to the problems of aggregation that are likely to confront strategic management researchers in the future.
Get full access to this article
View all access options for this article.
References
1.
Allen, R. E. (1983). Efficiency, market power and profitability in American manufacturing. Southern Economic Journal, 49(4), 933-940.
2.
Asch, P., & Seneca, J.J. (1976). Is collusion profitable?Review of Economics and Statistics, 58(1), 1-12.
3.
Bresnahan, T. E., & Schmalensee, R. (1987). The empirical renaissance in industrial organization: An overview. The Journal of Industrial Economics, 35(4), 371-378.
4.
Bain, J. (1951). Relation of profit rate to industry concentration: American manufacturing, 1936-1940. Quarterly Journal of Economics, 65, 293-324.
5.
Clarkson, K.W., & Miller, R.L. (1982). Industrial organization: Theory, evidence and public policy. New York: McGraw-Hill.
6.
Collins, N., & Preston, L. (1968). Concentration andprice-cost margins in manufacturing industries. Berkeley: University of California Press.
7.
Collins, N., & Preston, L. (1969). Price-cost margins and industry structure. Review of Economics and Statistics. 51(3), 271-286.
8.
Comanor, W., & Wilson, T. (1967). Advertising, market structure and performance. Review of Economics and Statistics, 49(4), 423-440.
9.
Dalton, J.A., & Penn, D.A. (1976). The concentration-profitability relationship: Is there a critical concentration ratio?The Journal of Industrial Economics, 25(2), 133-142.
10.
Esposito, F.E., & Esposito, L. (1977). Aggregation and the concentration-profitability relationship. Southern Economic Journal, 44(2), 323-332.
11.
Fahey, L., & Christensen, H.K. (1986). Evaluating the research on strategy content. Journal of Management, 12(2), 167-183.
12.
Fahey, L., & Narayanan, V. K. (1986). Macroenvironmental analysisfor strategic management. St. Paul: West.
13.
Fox, E.M. (1982). The new merger guidelines: A blueprint for microeconomic analysis. The Antitrust Bulletin, 27, 519-592.
14.
Fuchs, VR. (1961). Integration, concentration and profits in manufacturing industries. Quarterly Journal of Economics, 75, 278-291.
Gale, B.Y., & Branch, B. (1982). Concentration versus market share: Which determines performance and why does it matter?The Antitrust Bulletin, 27, 83-106.
17.
Hambrick, D.C. (1983). An empirical typology of mature industrial product environments. Academy of Management Journal, 26(2), 213-230.
18.
Haspeslagh, P. (1982). Portfolio planning: Uses and limits. Harvard Business Review, 60(1), 58-73.
19.
Hirschey, M. (1982). Intangible capital aspects of advertising and R&D expenditures. The Journal of Industrial Economics, 30(4), 375-390.
20.
Huff, A.S., & Reger, R.K. (1987). A review of strategic process research. Journal ofManagement, 13(2), 211-236.
21.
Hunter, J.E., Schmidt, F.L., & Jackson, G.B. (1982). Meta-Analysis: Cumulating research findings across studies, Beverly Hills, CA: Sage Publications.
22.
Ijiri, Y., & Simon, H. (1971). Effects of merger and acquisitions on business concentration. Journal of Political Economy, 79(2), 314-322.
23.
Imel, B., & Helmberger, P. (1971). Estimation of structure-profits relationships with application to the food processing sector. American Economic Review, 61, 614-627.
24.
Jones, J.C.H., Laudadio, L., & Percy, M. (1977). Profitability and market structure: A cross comparison of Canadian and American industry. Journal of Industrial Economics, 25(3), 195-211.
25.
Kilpatrick, R.W (1967). The choice among alternate measures of industrial concentration. Review of Economics and Statistics, 49(2), 258-260.
Kwoka, J.E. (1981). Does the choice of concentration measure really matter?Journal of Industrial Economics, 29(4), 445-453.
28.
Levinson, H. (1960). Post war movements of prices and wages in manufacturing industries (Study Paper No. 21 of the Joint Economic Committee). Washington, DC: U.S. Government Printing Office.
29.
Levy, D.T. (1984). Variation in the concentration-profit relationship across industries. Southern Economic Journal, 51(1), 267-274.
30.
Lustgarten, S., & Thomadakis, S. (1987). Mobility barriers and Tobin's q. Journal of Business, 60(4), 519-537.
31.
Mann, H.M. (1966). Seller concentration, barriers to entry, and rates of return in thirty industries, 1950-1960. Review of Economics and Statistics, 48(4), 296-307.
32.
McGee, J., & Thomas, H. (1986). Strategic groups: Theory, research and taxonomy. Strategic Management Journal, 7141-160.
Ornstein, S. (1972). Concentration and profits. Journal of Business, 45(4), 519-541.
35.
Porter, M. E. (1980). Competitive strategy. New York: Free Press.
36.
Porter, M.E. (1981). The contributions of industrial organization to strategic management. Academy of Management Review, 6, 609-620.
37.
Porter, M.E. (1985). Competitive advantage, New York: The Free Press.
38.
Rhoades, S.A. (1973). The effects of diversification on industry performance in 241 manufacturing industries: 1963. Review of Economics and Statistics, 55(2), 146-155.
Schmalensee, R. (1977). Using the H-Index of concentration with publised data. The Review of Economics and Statistics, 59, 186-193.
42.
Schwartzman, D. (1959). Effect of monopoly on price. Journal of Political Economy, 67(4), 352-362.
43.
Shepherd, W G. (1972). The elements of market structure. The Review of Economics and Statistics, 54(1), 24-37.
44.
Sherman, H. (1964). MacroDynamic economics. New York: Appleton-Century Crofts.
45.
Sherman, H. (1968). Profits in the United States: An introduction to a study of economic concentration and the business cycle. Ithaca, NY: Cornell University Press.
46.
Stigler, G. (1963). Capital and rates of return in manufacturing industries. Princeton, NJ: Princeton University Press.
47.
Stigler, G. (1964). A theory of oligopoly. Journal of Political Economy, 72(1), 44-61.
48.
Stigler, G. (1968). The organization of industry. Homewood, IL: Irwin.
49.
Weiss, L. (1963). Average concentration ratios and industrial performance. Journal of Industrial Economics, 11(3), 237-254.
50.
Weiss, L. (1974). Concentration-profits relationship and antitrust. In H.J. Goldschmid, H.M. Mann, & J.F Weston (Eds.), Industrial concentration: The new learning (pp. 184-233). Boston: Little, Brown.
