How Firms Gain, Hold, or Lose It and the Impact on Economic Performance
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280 pages, figures, tables
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6 1/8 x 9 1/4
Recommended for public and academic library collections, lower-division undergraduate through graduate.
[A]n interesting collection of essays which suggest that dominant firms should be responsive to reasonable rules of competition which, left unenforced by the "invisible hand" of the domestic market, should be exacted by foreign competitors or promulgated by government policy and law.
These concise and brief case studies provide cogent summaries of the rise and fall of very big business within a market context....Althogether, this is an interesting collection of essays which suggests that dominant firms should be responsive to reasonable rules of competition which, left unenforced by the "invisible hand" of the domestic market, should be exacted by foreign competitors or promulgated by government policy and law.
—H-Net Reviews in the Humanities & Social Sciences
Economic theorizing suggests that firms can acquire and maintain market dominance in a number of ways. Some economists argue that firms attain dominance only by being relatively more efficient than their rivals and retain leadership only by staying more efficient than their rivals. Others argue that efficiency is not the only source of dominance and that leaders can retain preeminence even if they are inefficient. This book attempts to sort out the relevant points by exploring market dominance experienced by firms in ten different industries. It examines factors that led to acquiring, holding and in some cases losing dominance and asks whether those factors were consistent with economic efficiency.
The results suggest that both schools make valid points. Generally, firms that rose to dominance were market pioneers and did so using economically-efficient strategies. In some cases, however, firms rose to dominance using inefficient strategies. Once they reached their ascendance, these firms engaged in a number of strategies, some efficient, others inefficient, to maintain their dominant positions.
Most of the firms examined eventually lost their dominance. In some cases, the market evolved too rapidly for any firm to maintain control. In other cases the fall was ushered along by federal antitrust and trade policy. In still other industries, it was due either to poor management or the firm becoming inefficient. However, even when some of these dominant firms became inefficient, the market system worked only very slowly to remove them.
The analysis has specific implications for antitrust policies toward dominant firms. Because the sources and consequences of dominance can be varied, neither a laissez faire policy in favor nor a per se injunction against dominance is called for. A reasoned approach, tempered by underlying market conditions, is warranted toward the strategies used to acquire and maintain dominance.
Introduction by David I. Rosenbaum
The Standard Oil Trust by Leslie D. Manns
Tobacco: Predation and Persistent Market Power by Walter Adams and James W. Brock
Alcoa and the U.S. Aluminum Industry by Hayley Chouinard and David I. Rosenbaum
Dow Chemical and the Magnesium Industry by Marvin B. Lieberman
Eastman Film Industry: Picture Imperfect? by Vrinda Kadiyali
The Rise and Fall of Dominant Firms in the U.S. Automobile Industry: A Tale Twice Told by Lawrence J. White
The Rise and Fall of IBM by Donald E. Waldman
Microsoft by Rochelle Ruffer and Donald E. Waldman
Blue Cross: Health Insurance by Erwin A. Blackstone and Joseph P. Fuhr
AT&T's Grand Design for Dominance in the Global Information Age by Harry M. Trebing and Maurice Estabrooks
Conclusion by David I. Rosenbaum