Corporate Diversification and Market Structure

Views differ regarding the structural implications of diversification by large industrial corporations. As yet, there is little definitive empirical evidence. This paper, piecing together data from a variety of sources, seeks to test the proposition that this diversification has tended to strengthen the market position of leading firms in already concentrated industries. It finds the opposite. The projected market share of leading firms is shown to be reduced by the entry of large corporations. The more concentrated the entered industry, the greater the reduction. The paper also demonstrates the presence of barriers insulating the market position of leading firms in concentrated industries from the competition of entering smaller firms.