Abstract
China’s economy has been transitioning from a phase of rapid growth to a stage of high-quality development that is called “new normal,” and China’s construction industry plays a pillar part in China’s economy. Nevertheless, the industry is large but not strong. This labour-intensive industry suffers from low concentration and fierce competition. Based on the organizational theory, which shows how market structure contributes to the growth of industry, this study aims to explore the impact of market concentration and market power on firm’s turnover and profit. Using statistical analysis and panel data of 37 China’s construction companies from 2009 to 2018, this study proposes and calculates the market concentration (CR) and the market power (MP) of China’s companies. Then the augmented Cobb–Douglas production function and OLS regression are used to explore the growth factors of China’s construction industry. The results show that the market concentration increases both the turnover and profit of construction firms. However, market power increases the profit of construction firms while decreases the turnover. In addition, the companies that are China’s non-state-owned have overseas income or are civil engineering and construction have more advantages in the growth of the construction industry in “quality”. This study provides a reference to understand the structures of the construction industries and the structural effect on the growth of different types of firms and could be replicated in other countries with the similar situation.
Highlights
China’s economy has been transitioning from a phase of rapid growth to a stage of high-quality development that is called “new normal,” and China’s construction industry plays a pillar part in China’s economy
Market power increases the profit of construction firms while decreases the turnover
After find out the current situation of China’s construction industry, we introduce the market concentration and market power into the regression to analyze their effects on firm growth. e regression equations are estimated by applying conventional panel data models, it is necessary to determine whether the model should use fixed effects or random effects
Summary
China’s economy has been transitioning from a phase of rapid growth to a stage of high-quality development that is called “new normal,” and China’s construction industry plays a pillar part in China’s economy. E results show that the market concentration increases both the turnover and profit of construction firms. Market power increases the profit of construction firms while decreases the turnover. According to National Bureau of Statistics of China (NBSC) (2019), China’s construction industry companies (referred to as general and professional contracting construction companies with qualification grade, excluding labour subcontracting construction companies) completed the total output value of the construction industry of CNY 235085.53 billion with an increase of 9.88% year-on-year. Latest statistics from Engineering News-Record (ENR) (2020) show that there are 74 Chinese construction companies on the ENR’s Top 255 International Contractors (TIC225) and gain a total contracting revenue of $120 billion from their overseas construction market in 2019, which accounted for 25.4% of the total international sales of the TIC225. Many researchers in the construction industry focus on the concentration studies to investigate the relationship between market concentration and firm growth because this labourintensive industry usually suffers from low concentration
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