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Title: Is economic performance driven by market power or efficiency? The Czech Food Processing Industry’s Situation
Abstract: The primary cause of the profitability of Czech food processing companies is identified in this article. In order to achieve this, the profitability of the food industry was examined within the context of the Structure-Conduct-Performance (SCP) paradigm, with a particular focus on the comparison of the relative market power (RMP) hypothesis and the efficiency hypothesis. Six Nomenclature of Economic Activities (NACE) subsectors of the Czech food processing industry’s microeconomic data for the years 2016 to 2020 were used in the analysis. The final dataset included 623 companies and 2639 observations. The Czech Statistical Office and Bisnode Albertina’s databases provided the information. A regression model and stochastic frontier analysis (SFA) were both employed in the study. According to the research done, performance does not appear to be explained by a firm’s market share representing a stronger market position. The marginal impact of market power on profitability over technical efficiency was only demonstrated in one subsegment. The implication is that firms with relatively larger market shares do not possess greater market power and, consequently, do not generate higher profits.
Keywords: The primary cause of the profitability of Czech food processing companies is identified in this article. In order to achieve this, the profitability of the food industry was examined within the context of the Structure-Conduct-Performance (SCP) paradigm, with a particular focus on the comparison of the relative market power (RMP) hypothesis and the efficiency hypothesis. Six Nomenclature of Economic Activities (NACE) subsectors of the Czech food processing industry’s microeconomic data for the years 2016 to 2020 were used in the analysis. The final dataset included 623 companies and 2639 observations. The Czech Statistical Office and Bisnode Albertina’s databases provided the information. A regression model and stochastic frontier analysis (SFA) were both employed in the study. According to the research done, performance does not appear to be explained by a firm’s market share representing a stronger market position. The marginal impact of market power on profitability over technical efficiency was only demonstrated in one subsegment. The implication is that firms with relatively larger market shares do not possess greater market power and, consequently, do not generate higher profits.
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
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