Modelling a competitive field of an enterprise: A structural approach

Abstract

The article deals with modelling a competitive field of an enterprise and performs its empirical assessment. The methodological base includes the theory of industrial organization, the theory of organizational fields and the theory of competitive field. The author proves that an industrial market can be viewed as a competitive field defined by a firm (or imposed on it), where strategic interaction is realized within the framework of the status hierarchies of the participating firms. Such an approach allows looking at the market structure and behaviour of firm in more detail. To characterize a competitive field, the author uses indicators of the market structure, monopoly power and power asymmetry and substantiates the choice of the indicators for their evaluation. The modified Herfindahl-Hirschman index is applied for assessing the market structure; the Bain index is utilized to evaluate monopoly power; and its deviation is used to assess power asymmetry. Based on the combination of the selected indicators, we distinguish between four types of competitive fields and construct a matrix for determining them. The research presents the empirical testing of the proposed approach using the case study of eight industries. The findings of the empirical part unveil only three (out of four) competitive fields within the industries under study. A dynamic analysis shows that all the industries are sustainable oligopolies with a low level of competition. Competitive fields formed in the industrial markets are some sort of a trap, since they do not encourage industrial enterprises to develop technological and management innovations. The author’s approach is versatile and can be used to determine a competitive field in other industrial markets.

Keywords

• market structure
• modelling
• competitive field
• enterprise
• industrial market