Development of Industrial Markets in Russian Economy: Empirical Research

Abstract

Very interesting processes of industrial markets’ development could be currently observed in modern Russian economy. Some markets have long history, while some a totally new for Russia. Different examples were studied under our research. Main attention was paid to lease market and market for informational technologies (IT). Our main objectives look as follows: 1) to identify key features of selected industrial markets; structure; 2) to determine sources of market power for the firms operating on these markets; 3) to forecast future development of selected markets; Empirical data of various monitoring projects on Russian industrial markets were used. Each example is understood and analyzed as a separate industrial market. Our initial hypothesis is related to the competitive structure of these markets. High level of competition could be explained as a positive tendency. If these markets are far form being competitive, if they are ruled administratively than it is important to analyze the position of market leaders, to see the sources of market power. Research methodology is based on descriptive model suggested by Edward Mason and Joe Bain - The Structure – Conduct – Performance Paradigm. Market concentration indicators, level of economic activity of large enterprises and level of dominance (market power) of one or several firms are among basic indicators of any industrial market structure. Real Russian markets provide basis for very interesting interpretations from the point of view of Industrial and Institutional Economics. Empirical data show that in general competition on the Russian markets increased during last 15 years. At the same time competition led to the companies’ consolidation and concentration increase. We suggest an approach to the study of leading position and firms’ market power. Under this approach we analyze “sustainability” and “stability” of leading position and therefore market power on the industrial market. According to our definition “sustainability” of leading position of the company means that it is based on various criteria. “Stability” of firm’s leading position in our approach reflects long term leadership. Special numerical coefficient is suggested to measure the level of stability and sustainability, the meaning of this coefficient varies from 0 to 1. If sustainable and stable leadership could be observed at the market it would be possible to make forecasts on this market development tendency. Our results show that selected markets are characterized by the existence of distinguished leaders. However in the case of lease market these leaders’ dominance co-exists with competitive segment emergence. This tendency could be interpreted as a positive signal and in general promotes effective financial markets’ infrastructure development. The IT market is characterized by strong influence of government intervention. The level of stability and sustainability of leadership is increasing on both markets. Oligopoly structure is being formed. It is possible to predict mergers and acquisitions on both markets.