Structure-conduct-performance Research Articles

The Neal Report and the Crisis in Antitrust

The Neal Report, which was commissioned by Lyndon Johnson and published in 1967, is rightfully criticized for representing the past rather than the future of antitrust. Its authors completely embraced a theory of competition and industrial organization that had dominated American economic thinking for forty years, but was just in the process of coming to an end. The structure-conduct-performance (S-C-P) paradigm that the Neal Report embodied had in fact been one of the most elegant and most tested theories of industrial organization. The theory represented the high point of structuralism in industrial organization economics, resting on the proposition that certain market structures were highly concentrated and experienced high barriers to entry, making certain types of conduct inevitable. Under the very strong Cournot assumptions of the day oligopolists simply could not avoid setting prices above costs and continuously and excessively differentiating their products. The result was high short-run profits, excessive investment in product differentiation and advertising, reluctance to cut price in order to grow market share, and general stagnation.The Neal Report's fate lay in the fact that the S-C-P paradigm was coming under withering attack by the late 1960s. The Report's simple and uncritical acceptance of the S-C-P paradigm as gospel inspired many young academics in the United States to align themselves with the competing Stigler Report, commission by President Johnson's successor Richard M. Nixon. The conflicts that erupted largely defined the views of some of the 1970s most important antitrust scholars - namely Richard A. Posner, Robert H. Bork, and William F. Baxter.

Exploring Wheat Value Chain Focusing on Market Performance, Post-Harvest loss, and Supply Chain Management in Ethiopia: The Case of Arsi to Finfinnee Market Chain

In this study the wheat value chain from one of the highest wheat producing areas in Ethiopia (Arsi zone of Oromia region) to central markets in Finfinnee/Addis Ababa was assessed focusing on market performance, post-harvest losses, and the potential of supply chain management to improve the chain.Value chain analysis, questionnaire-based loss estimations, Tobit model for loss factor determination, structure-conduct-performance (S-C-P), four firm concentration ratio (CR4), market and profit margins, and theory of supply chain management were used to evaluate the wheat value chain. Primary data were collected using a semi-structured survey questionnaire and interview of key informants. The data was analyzed using descriptive statistics and Tobit model in SPSS and Excel software.The study identified producers and their cooperatives, collectors, wholesalers, retailers, and processors as primary actors. At these stages of the wheat chain, post-harvest losses reported were 21%, 3%, 4%, 6%, and 5%, respectively. With the highest loss happening at producers’ stage, this stage was identified as loss-hot-spot point. The Ethiopian Grain Trade Enterprise was also identified as main actor connecting the flow of wheat between producers and consumers occasionally. An increase in a quintal of wheat production, bad storage facilities, and weather conditions caused in an increase in post-harvest losses of 5.18, 4.06 and 1.36 Kgs per quintal, respectively, at 1% statistical significance.The assessed wheat value chain was characterized by unfair share of benefit among the chain actors. The producers who were in a position of adding the highest portion of value to the wheat received only 16% of the profit margin. The traders jointly and processors shared 33% and 51% of the profit margin, respectively. The CR4 assessments in the major wheat markets along the chain noted that with CR4 in Etaya (26.8), Asala (37.7), Adama (41.4), and Finfinnee (42.8), the wheat markets near the producers were more competitive than the central ones. Assessment on the degree of clearness noted that for 54% of the chain actors, it was very difficult to get reliable information about the whole wheat market along the chain. Licensing procedure, capital, and competitions were reported as barriers to wheat market entry.For all producers, retailers, and collectors on agreement with their suppliers, the only means of agreement in doing business with their transaction partners were spot-market. However, 63% and 16% of collectors had oral and written contractual agreements, respectively, with their buyers. 36% and 31% of wholesalers reported they had oral contracts with their suppliers and buyers, respectively; 18% and 12% of them had written contracts with suppliers and buyers, respectively. Similarly, 42% and 9% of the processors had oral agreement with their suppliers and buyers while 23% and 27% of them had written contract agreement with their suppliers and buyers, respectively.The study noted that the wheat chain assessed was characterized by disintegrated chain where businesses were self-oriented and mutualism has not well-developed. Working towards supply chain management and relational view of business has been recommended based on the problems identified in the study.

Concentration–Profitability Nexus: New Approach from Causality

The study revisits the concentration–profitability nexus of the structure–conduct–performance (SCP) paradigm. It contributes to the literature by considering the argument from the perspective of causality since existing empirical works only consider a unidirectional relationship of concentration as being determined by profitability, neglecting the feedback relationship. Unlike the existing studies, this study includes loan and advances, and the deposit concentration besides the total asset to capture concentration for robustness. Using Nigerian banking industry to test our proposition, the empirical results show the existence of bi-directional relationship between profitability and banking concentration indices, implying that past banking industry concentration indices can explain the present level of profitability in the Nigerian banking industry and vice versa. Furthermore, the results of the study also show a negative relationship between banking concentration and profitability levels in Nigeria.

The market performance of carbon trading in China: A theoretical framework of structure-conduct-performance

In order to provide feasible platform for the establishment of national carbon market in China and other developing countries, it is vital to competitively assess China’s seven Pilot emissions trading schemes (ETS) by comparing market performances. Hence, this paper employs the structure-conduct-performance (SCP) framework to qualitatively evaluate the external and internal performances of the China’s carbon market. Particularly, a structural vector auto-regression (SVAR) approach is adopted to calculate the three invisible indicators of internal performance using time series of three typical Pilot ETS from the launching dates till May 4, 2016 with restrictions on return, trading volume and volatility variables. The results depicted that: (i) absence of legal binding forces (Market environment), market segmentation (Structure), excessive allowance allocation and lack of investment (Conduct) are main reasons for poor performance of China’s Pilot ETS; (ii) with respect to internal performance, Hubei ETS has higher speculation and volatility sensitive to pricing returns. Hubei ETS also has the fastest information diffusion speed followed by Guangdong and Shanghai ETS. Guangdong ETS has a conservative investment environment and volatility is receptive to the changes in trading volume whereas Shanghai ETS has a mature investment environment.

Hotel-Specific, Industry-Specific and Macroeconomic Determinants of Profitability in London Hotel Industry: Structure-Conduct-Performance or Efficient-Structure Hypothesis?

Using a sample of 50 London hotels over the period 2006-2015, the current paper significantly contributes to the empirical literature by comprehensively and systematically investigating the hotel-specific, industry-specific and macroeconomic determinants of profitability under a two-step Generalised Method of Moments (GMM) system estimator. The profitability is cross-checked by different indicators. This paper fills the gap in empirical literature to test the Structure-Conduct-Performance (SCP) hypothesis and Efficient-Structure (ES) hypothesis by including both a competition indicator and an efficiency indicator. The results show that London hotel profitability is significantly affected by liquidity, capitalization, gearing, cost of employees as well as development of London hotel industry. The results of the current paper provide important implications for London hotels to improve their profitability.

Inflated medicine prices in Vietnam: a qualitative study.

One third of the world's population lacks regular access to essential medicines partly because of the high cost of medicines. In Vietnam, the cost to patients of medicines was 47 times the international reference price for originator brands and 11 times the price for generic equivalents in the public sector. In this article, we report the results of a qualitative study conducted to identify the principal reasons for inflated medicine prices in Vietnam.Between April 2008 and December 2009, 29 semi-structured interviews were conducted with staff from pharmaceutical companies, private pharmacies, the Ministry of Health, and the Ministry of Finance of Vietnam. Study participants were recruited using a combination of purposive and snowball sampling techniques. Interviews were recorded, transcribed and coded using NVivo8® software and analyzed using a framework of structure-conduct-performance (SCP).Participants attributed high prices of originator medicines to a monopoly of supply. The prices of generic medicines were also considered to be excessive, reportedly due to the need to recoup the cost of financial inducements paid to prescribers and procurement officers. These inducements constituted a dominant cost component of the end price of generic medicines. Poor market intelligence about current world prices, as well as failure to achieve economies of scale because of unwarranted duplication in pharmaceutical production and distribution system were also factors contributing to high prices. This was reported to be further compounded by multiple layers in the supply chain and unregulated retail mark-ups.To address these problems a multifaceted approach is needed encompassing policy and legislative responses. Policy options include establishing effective monitoring of medicine quality assurance, procurement, distribution and use. Rationalization of the domestic pharmaceutical production and distribution system to achieve economies of scale is also required. Appropriate legal responses include collaborations with the justice and law enforcement sectors to enforce existing laws.

Assessment of the Structure, Conduct, and Performance of the Philippine Telecommunications Industry

Assessment of the Structure, Conduct, and Performance of the Philippine Telecommunications Industry

The Determinants of Profitability in the Banking Industry: Empirical Research on Selected Balkan Countries

The determinants of bank profitability in general, and of the impact of market structure and efficiency on bank performance in particular, remain a much- researched topic in bank performance analysis. The purpose of this article is to investigate the relevance of the structure-conduct-performance (SCP) hypothesis versus the efficiency hypothesis in explaining bank performance by analyzing 127 commercial banks from six Balkan countries (Slovenia, Croatia, Serbia, Bosnia and Herzegovina, Montenegro, and Macedonia) over the period 2005–2009. In order to account for the dynamic nature of bank profits, it uses a GMM estimator in testing the determinants of bank profitability. The estimation results suggest that profits persist to some extent, indicating that the deviation from a perfectly competitive market structure is marginal. In addition, the findings suggest that efficiency is significantly and positively associated with profitability, whereas the industry concentration variable is insignificant in explaining profitability, indicating support in favor of the efficiency hypothesis. Moreover, among the bank-specific control variables, only size is reported insignificant, and the rest of the variables affect bank profitability in the anticipated manner. Finally, the results suggest that neither inflation nor economic growth has an impact on bank profitability.

Institutional Transformation of Local Innovation Systems in Farmer Community of Belu, Nusa Tenggara Timur

Institutional is one factor that must be considered in the process of technology transfer. The Local Innovation System (in this case SIDa-Belu) was trying to look at those problems in agriculture to empowering poor farmers in the area. This paper analyzed transformation intitution, which occurs during and after the proccess of SIDa-Belu Implementation. The methods used in this research is descriptive analysis with structure, conduct, performance (SCP) approach. Institutional change is a transformation proccess that is part of development. Therefore, the main objective of any institutional change is to internalize the potential for greater productivity which comes from improved resource utilization, and creating a new balance simultaneously. On SIDa-Belu implementation, institutional change encourage the change for farming groups. Before SIDa-Belu they did subsistent farming, and after implementation they make a new adjustment by external factors (permanent feedback proccess) into modern farming groups with market oriented.

Structure, Conduct and Performance Analysis of Indian Commercial Banks

The market structure, conducts and performance of the Indian banking sector have changed since the introduction of banking sector reforms. Slower economic growth, coupled with asset quality problems in recent years, has taken a toll on the overall health of the Indian banking sector. Higher statutory capital requirement under Basel III has posed another major challenge to the Indian banks. The purpose of the study is to examine the impact of structural changes and conduct of Indian commercial banks on their profitability in the paradigm of structure–conduct–performance (SCP) framework. Market concentration, bank-specific/macroeconomic variables have been considered as important determinants of the profitability. The regression results find a negative relationship between profitability and market concentration and reject SCP hypotheses. The study found that capitalization, credit risk, leverage and ownership structure are the most important determinants of the profitability of Indian banks. The study also found that financial crisis had no significant impact on the profitability of Indian banks. JEL Classification: C4, G21, G28, L19

Performance of Non-African Foreign Commercial Banks in Uganda

The focus of this study was to establish key factors responsible for the performance of non-African foreign Commercial banks in Uganda, in the light of Global Advantage Theory. The analysis was supplemented by structure–conduct performance (SCP) and efficiency hypothesizes (ES).The study analysed the performance of licensed non-African foreign commercial banks on average, over the period 2000-2011, using Linear multiple regression analysis. The study findings showed that, management efficiency, capital adequacy and reputation/goodwill are key factors affecting the performance of non-African foreign commercial banks in Uganda. On the contrary, credit risk has a negative impact on performance of non-African foreign commercial banks in Uganda. On a positive note, diversification, investment in securities and correct prediction of inflation are factors that drive the enhanced performance of non-African foreign commercial banks in Uganda. The emerging policy implication is that commercial banks’ managements should focus on improving: management efficiency; bank reputation/goodwill; credit risk management; capital adequacy levels; diversification and investment. In addition, monetary policy regulations and instruments should not enforce high liquidity and capital adequacy levels. There is also need for regulations on non-interest income activities to harmonize the impact of diversification on all commercial banks’ performance and avoid the exploitation of commercial banks’ customers.

Innovation's Impact on SMES' Financial Performance through Voluntary Disclosed Information

The purpose of this paper is to study the effect of innovation on Small and Middle-sized Enterprises’ performance in comparison with the effect of the industrial activity of the company. The economical measuring of performance was made by Cash Flow over Total Asset. As independent variables we used two indicators based on the information voluntarily disclosed by the companies, one to measure innovation and the other to catalogue the activity differently than the industrial classifications. The sample included a total of 920 companies from the Spanish automobile components industry (81% SMEs and 19% large companies). The results show that 2008 crisis is the factor with the greatest impact on the results; the companies that innovate the least experience a lower cash flow on assets, companies with a medium level of innovation, mainly Middle-Sized firms, have best results; moreover, the efficiency of innovation is reduced beyond a threshold that marks the boundary between the Structure–Conduct–Performance paradigm and the Resource–Based Approach.

Market structure and performance of Malaysian banking industry

Purpose The main purpose of this paper is to examine the relationship between the market structure and financial performance of Malaysian commercial banks over the period of 2000 to 2011 by testing the structure-conduct-performance (SCP) and efficient-structure (ESH) hypotheses. Design/methodology/approach Data envelopment analysis (DEA) is employed to measure the efficiency of banks, while concentration ratio is used to assess the market structure of Malaysian banks. Next, utilizing the least squares method, both variables – market structure and efficiency of banks – among other explanatory variables (market share, operating expenses, loans ratio and size of banks) are regressed upon the dependent variable, namely financial performance of banks represented by return on asset (ROA), return on equity (ROE) and net interest margin (NIMTA). Findings The concentration of Malaysian banking industry is at a declining trend; structurally speaking, Malaysian banks are more competitive due to less market concentration. In terms of efficiency, the DEA results reveal that Malaysian banks are operating below their capacity at 40 per cent of efficiency. Thus, Malaysian banks could reduce their utilization of inputs by 60 per cent to operate on the efficient frontier. Next, the results offer support to ESH, which implies that market concentration and banking efficiency determines the profitability performance of Malaysian commercial banks. Originality/value Past studies on Malaysian banking sector had tended to focus either on measuring the performance or assessing the market structure of banks. Thus, this study attempts to fill the gap in the literature by testing the nexus between the market structure and the performance of banks.

Competition and Industry Performance: A Panel VAR Analysis in Indian Manufacturing Sector

This study tries to investigate the relationship between competition and performance in a dynamic framework in the post liberalisation era with the help of Structure Conduct Performance paradigm. By employing panel VAR estimation procedure on 23 Indian manufacturing industries that comprise of BSE listed manufacturing firms, the study finds that Structure Conduct Performance paradigm does not always hold true in Indian manufacturing scenario in the post liberalisation period. This might be because with the introduction of competition in the market, the larger firms are still practising anticompetitive strategies to have a control over the market. The relationship between performance and conduct indicates that competition has not fully succeeded in eliminating the imperfections from the market.

Institutional Analysis of Watershed Manangement in Batam Island

This study aimed to look at the institutional condition of the current watershed management and institutional models (management authority) which were relevant to Batam Island in the future. The data collection was conducted by interview techniques and was validated through focus group discussions. The data were described and analyzed with SCP (structure, conduct, performance) method for relevant stakeholders’ data, legislation, and with KIPA (quadrant interpretative performance analysis) method for data of interest and power of stakeholders. The results showed that the watershed management institutional in Batam Island was still overlapping. According to the regulations, the Management Board (BP) of Batam Island was given the authority to manage and to use land and water; on the other hand the Local Government (Mayor) was facilitated by BPDAS KEPRI (Watershed Management Institute of Riau Islands) to also arrange an integrated watershed management. The results of discussions showed that BP Batam was an institute of having interest and power as well as key position in achieving successful watershed management. Based on this study, it was suggested that BP Batam should be given authority in watershed management in Batam Island, which keeps referring to the norms, standards, procedures, and indicators set by the central government.

Telecom market liberalization and service performance outcomes of an incumbent monopoly

Using data from a high-income, emerging market economy in the Middle East, this study examines changes in service performance outcomes of an incumbent monopoly during different periods in the phased liberalization of the country’s telecommunications market. The study draws on Structure-Conduct-Performance (SCP) theory and Social Exchange Theory (SET) to develop hypotheses about expected changes in four customer-based service performance outcomes—service quality perceptions, customer satisfaction, customer loyalty, and customer attitudes. These are tested using data collected in a longitudinal tracking study spanning different periods in the liberalization process. Results show that all four performance outcomes improved significantly during an early post-liberalization period when there was only one additional competitor in the market, but declined slightly during a later period when a second competitor entered the market. However, structural relationships among the outcomes themselves remained invariant across liberalization periods. Policy-making and theoretical implications of the results are outlined and discussed. Although the data come from a single industry in an emerging market economy, a particularly key implication is that while incumbent monopolies may initially harbor a preference for the comfort and ‘freedom’ that comes with being the only player in the market, under certain circumstances liberalization can actually benefit them through the impetus that it provides for their own service quality improvements.

The Impact of Market Structure and the Business Cycle on Bank Profitability: The Role of Foreign Ownership. The Case of Poland

The aim of this study is to examine the impact of banking-sector structure and macroeconomic changes on bank profitability in the Polish banking sector over the past fifteen years (i.e., prior to and during the global financial crisis of 2008). The model developed in this paper incorporates the Structure-Conduct-Performance (SCP) hypothesis, as well as the Relative Market Power (RMP) hypothesis created by Smirlock (1985). Furthermore, this paper also examines the overall effect of financial structure and macroeconomic conditions to determine whether financial development and business cycles affect the profit of Polish banks. Finally, this paper tests the impact of foreign capital on the profitability of Polish banks and attempts to determine if there is a link between the context of the parent banks and the profitability of their affiliates. Empirical results based on two panel data sets describing both micro-level and the macro-level data are ambiguous, and find evidence of the RMP hypothesis, as well as the traditional SCP, in the Polish banking sector. This paper also finds that increased foreign ownership and intermediation have a positive effect on bank profitability. Furthermore, this paper finds a positive correlation between the context of parent banks and the profitability of their affiliates. Also, the profitability of commercial banks in Poland are contingent upon the business cycle.

Mobile and Digitally-Mediated Publishing Strategies in China: An Overview of Evolving Business Models

This paper provides an overview of the e-book publishing industry in China and its changing business models. As the conventional publishing industry has continued to contract, digitization is becoming increasingly popular. Although China is an influential developing country undergoing rapid change, a dearth of research on its digital publishing industry exists at the present time. This article therefore explores two main research questions: (1) What are the recent trends and business models of digital publishing in China? (2) How might we evaluate the effectiveness and efficiency of such business models? To this end, multiple case studies are employed, as is the paradigm of structure-conduct-performance (SCP). It is proposed that Content plus App and Content plus Device are the basic business models for Chinese digital content producers and distributors.

Identifying successful strategies for honey value chains in Brazil: a conjoint study

Purpose– Development studies rarely measure the impact of value chain strategies on performance. The purpose of this paper is to quantify the perceived contribution of strategies to the performance of three honey value chains in Brazil.Design/methodology/approach– The value chain structure-conduct-performance (SCP) framework was used to select strategies and two performance indicators, honey production growth and local value-added. In a conjoint study, experts were asked to judge the contribution to the two performance indicators of several hypothetical combinations of value chain strategies.Findings– According to the experts, adoption of specialised technical assistance, sharing resources at the production step, increase in exports, and organic certification were the strategies which contributed the most to performance. Simulations suggested that some honey value chains could have greatly increased their performance with these higher pay-off strategies.Research limitations/implications– Quantifying the perceived impact of individual strategies contributes to improved evaluation of development interventions.Practical implications– Outcomes also show that conjoint analysis is a useful method for policy evaluations in data scarce situations.Originality/value– The paper combines an extended SCP framework for strategy selection and conjoint analysis for strategy evaluation of value chains.

Dampak Liberalisasi Perdagangan Terhadap Kinerja Industri Manufaktur di Indonesia (Pendekatan Structure-Conduct-Performance)

<em>The influx of imported goods in the domestic market will pressure domestic producers to be more efficient. The more effiecient the domestic firm, the more competitive it becomes. This competitive firm is expected to have opportunities to expand to a larger market. This study analyzed the effect of trade liberalization to industrial performance in Indonesia. This study exploited data at the industry level, ie: 38 industries of three digits International Standard Industrial Classification (ISIC) during 2000-2009. The analysis was conducted within Structure Conduct Performance (SCP) framework. Industrial performance was measured by price-costmargin and trade liberalization was measured by export share and a dummy indicating implementation of Asean Free Trade Area (AFTA). Using the fixed effect model, the result showed weak evidence of the effect of trade liberalization to industrial performance in Indonesia. Dummy AFTA was negative and significant to industrial performance while export share was insignificant. The results might indicate that the adoption of AFTA endangered domestic firms’ performance.</em>