Lower bounds of concentration in Taiwan's manufacturing industries: do exports matter?

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This article aims to test Sutton's 'lower bounds' approach on the analysis of market concentration in a small open economy like Taiwan. Exporting, which is important to a small open economy, is also considered in order to investigate the role of foreign competition on the market structure. Using a stochastic frontier approach, the estimate findings are in accordance with Sutton's predictions, whereby the lower bounds for high advertising and/or R&D-intensive industries are higher than those for low advertising and/or R&D-intensive industries in Taiwan. At the same time, the lower bounds of concentrations for export-intensive industries do not differ significantly from that of nonexport-intensive industries. The deviations from the lower bound are explained by industry characteristics such as the cost disadvantage ratio, the share of small and median-size enterprises, turnover rate and growth rate.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840600606237

Affiliations: 1: Department of Economics, National Central University, Jhongli, 320, Taiwan 2: Department of Economics, Shih Hsin University, Taipei, Taiwan

Publication date: October 1, 2007

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