Foreign-invested Enterprises In China Research Articles

The Survival Technique and the Extent of Suboptimal Capacity

E survival technique used by George Stigler and T. R. Saving in identifying "optimal" scales of firm and plant is a tempting source of information in an area where data have not been plentiful, but many economists retain doubts about the usefulness of such estimates. This paper offers some evidence on the reliability of the survival technique and uses it as a basis for some generalizations about the present structure of industry. In Part I estimates of optimal scale based on plant-size data in five large industries for the last 27-36 years are compared with such engineering estimates as are available. In Part II the rate of adjustment toward optimal scales in these industries is evaluated. In Part III an attempt is made to determine the size of market necessary for the attainment of high degrees of "rationalization." Finally, in Part IV the relationship between concentration and the extent of suboptimal capacity is investigated in a number of industries using Census data.