Do Businesses Get Stuck in the Middle? The Peril of Intermediate Market Share
35 Pages Posted: 16 Dec 2019
Date Written: June 2, 2017
The quest for stylized facts regarding market share and natural market structures is not new, however extant research has predominantly concentrated on share rank and distribution. Using a sample of 220K firm-year observations representative of the US economy over four decades, this study reexamines the relationship between market share and profitability. The results indicate that being ‘stuck in the middle’ is a prevalent and empirically generalizable phenomenon that persists decade after decade even as average industry profitability decreases. Businesses with roughly 3%-11% intermediate market share appear to be stuck in the middle between specialists and generalists and find themselves at significant financial performance disadvantages across industry groups. The relationship consistently follows a non-linear pattern which must be taken into account during research design and sampling.
Keywords: Market Share, Stuck in the Middle, Generalist, Specialist, Financial Performance, Industrial Organization, Empirical Generalization
JEL Classification: D01, D22, D4, L11, L16, L21, L22, L25, L26, L60, L70, L80, L90, M30
Suggested Citation: Suggested Citation