Industry competition and firm productivity: Evidence from the antitrust policy in China

Abstract

This study examines impacts of increased industry competition on firms’ productivity. We use the enacting of China's antitrust policy as a quasi-natural experiment, and find that the total factor productivity of firm with larger market power has a significant increase after the enacting of the Chinese Anti-Monopoly Law. The possible channels behind the effects are that the rising competition pressures, brought by the enacted antitrust policy, induce firms to increase their investment efficiency and innovation output. Our findings are more pronounced to firms in cities with lower regional marketization, firms under industries with less competition, and non-financial constrained firms.