THE STRUCTURE-CONDUCT-PERFORMANCE PARADIGM REVISITED: AN EMPIRICAL ANALYSIS FOR VIETNAMESE FIRMS

Tu Thuy Anh - Dinh Thi Thanh Binh - Nguyen Binh Duong - Nguyen Viet Duong

Abstract

Abstract:
The Structure-Conduct-Performance (SCP) paradigm became the dominant framework for empirical work in Industrial Organization starting from the early 1950s.1 There have been a large number of empirical researches in the literature examining the SCP hypothesis for various countries in the world. Nevertheless, empirical works in this literature for Vietnamese firms are still scared. This paper shows that, in general, the SCP paradigm fits Vietnamese firm data well. Concentration level (C in SCP) of the industry and barriers to entry (S in SCP) are key factors affecting firm performance (P in SCP). We find evidence that higher concentration ratio yields higher performane of firms. This finding provides important empirical evidence on Vietnam’s restructuring process, especially the stated-own enterprises. Vietnam has many economic groups that definitely posses high market power, hence enjoy higher returns. If some of these groups are not efficiently performing, this paper suggests that the government should “dillute” their industry by easing up the entry process hence to increase competitiveness of the industry. The ease of accessing different provinces in Vietnam – a special type of barriers to entry – proves to generate higher performance of firms. This finding is meaningful for provincial authorities in designing
policy to promote investment in their localities. Keywords: debt crisis, policy implications
Keywords: Industrial Organization, Structure – Conduct – Performance, Concentration
Ratio, Barrier to Entry, Economic Groups
Date of submission: 15 Sep 2014; Date of Revision: 2 Oct 2014