How much does industry matter in an emerging market economy?

Arnab Bhattacharjee, Sumit K. Majumdar

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    Theories of firm profitability make different predictions about the relative importance of firm, industry and time specific factors. We assess, empirically, the relevance of these effects over a sixteen year period in India, as a regime of control and regulation, pre 1985, gave way to partial liberalisation between 1985 and 1991 and to more decisive liberalisation after 1991. We find that firm effects are important throughout, when rent seeking opportunities proliferated, as well as when competitive forces were enhanced by institutional change. In contrast, industry effects significantly increased after liberalisation, suggesting that industry structure matters more within competitive markets. These findings help understand the relevance of different models over different stages of liberalisation, and have important implications for both theory and policy.
    Original languageEnglish
    Place of PublicationDundee
    PublisherEconomic Studies, University of Dundee
    Number of pages36
    Publication statusPublished - 2011

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherDepartment of Economic Studies, University of Dundee
    ISSN (Print)1473-236X


    • Firm profitability
    • Market structure
    • firm and industry effects
    • time effects
    • institutional change
    • transition economy

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    Bhattacharjee, A., & Majumdar, S. K. (2011). How much does industry matter in an emerging market economy? (Dundee Discussion Papers in Economics; No. 256). Economic Studies, University of Dundee.