Institutional Barriers and Industry Dynamics

54 Pages Posted: 1 Mar 2009 Last revised: 11 Apr 2013

See all articles by Sea-Jin Chang

Sea-Jin Chang

National University of Singapore (NUS) - Department of Business Policy

Brian Wu

University of Michigan, Stephen M. Ross School of Business

Date Written: January 2013

Abstract

This study demonstrates new entrants exhibit higher productivity but also higher exit hazard than incumbents in post-liberalization China. We argue this seemingly paradoxical relationship is attributable to institutional barriers, defined as the hindrance in the institutional environment that prevents market selection forces to function. New entrants require higher productivity to compensate for those institutional barriers, which in turn implies a higher exit hazard after controlling for productivity. Our empirical findings support this argument and further show that the differences in productivity and exit hazard between new entrants and incumbents become smaller where and when institutional barriers recede. By integrating economic and institutional perspectives, we highlight the importance of institutional factors in shaping industry evolution.

Keywords: industry dynamics, institutional barriers, incumbents, new entrants, liberalization

JEL Classification: C23, D21, D24, L10, O10

Suggested Citation

Chang, Sea-Jin and Wu, Brian, Institutional Barriers and Industry Dynamics (January 2013). Atlanta Competitive Advantage Conference 2009 Paper. Available at SSRN: https://ssrn.com/abstract=1350531 or http://dx.doi.org/10.2139/ssrn.1350531

Sea-Jin Chang (Contact Author)

National University of Singapore (NUS) - Department of Business Policy ( email )

17 Law Link
Singapore 117591
Singapore

Brian Wu

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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