Structure, Performance, and the Net Rate of Entry into Manufacturing Industries

Abstract

Traditional theory assigns great importance to free entry and exit by firms in order to insure good industry performance. The well-known empirical results of Bain [1] and Mann [7] have confirmed the theoretical importance of the conditions of entry. Recently, McGuckin [9] has presented evidence which shows an inverse relationship between the net rate of entry and increases in the market share controlled by the largest firms. If entry is likely to diminish the market power held by dominant firms and to lead eventually to improved industry performance, it is of interest to examine the determinants of entry itself.' This paper reports on an examination of the impact of demand growth, diversification, product promotion, and concentration on price-cost margins and subsequent rates of entry into four-digit Census industries.

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