Structure and performance: A case study of Pakistan's large scale manufacturing industries (1950-1987).

Abstract

The main focus of this thesis is on the measurement of concentration, determinants of levels and changes in concentration, and its effect on the levels and changes in performance in the large scale manufacturing sector in Pakistan at three points of time, 1970, 1978 and 1984. Published census of manufacturing industry data and other sources are utilized to develop estimates of selected variables, covering 41 sectors of production. In this way the thesis is the first of its kind in developing countries that attempts to analyze from a dynamic perspective the structure-performance hypothesis. A subject which was in the past approached only in terms of static analysis. On the basis of the results revealed by this enquiry the thesis argues that the manufacturing sector is dominated by large size establishments. This concentration stems from technological and financial discontinuities prevailing in the sixties. In the subsequent period tight government regulatory policies, public and private investment decisions, were largely instrumental in shaping the structure of manufacturing industries which on balance remained as concentrated as before. A second part of the thesis attempts to find confirmation of the hypothesis that structure affects performance. We find a frail and declining relationship between structure and performance thus there is little support for the argument advanced in earlier studies that structure exerts a strong positive influence on performance. The thesis argues that in the sixties the concentrated oligopolies were able to secure high profits which originated from their power to set prices irrespective of the reductions in the cost of production realized through technological and financial discontinuities. Unlike the sixties, in the subsequent period not only were prices controlled, but also increased cost resulting from internal and external changes squeezed the share of the profit, and smuggling more actively and product differentiation modestly also exercised their influence on the performance of the manufacturing sector. Finally the thesis shows that the relevance of the structure performance model varies from case to case and both the forces of monopoly and efficiency are at work to determine the performance of the manufacturing sector.