Entry Regulation and Persistence of Profits in Incumbent Firms

Sameeksha Desai, Johan Erik Eklund, Emma Lappi*

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

In line with the theory of creative destruction, industries where incumbent firms generate high profits will attract entry, which should drive down profits. This disciplinary effect of entry implies that profits above the norm should not exist in the long run. Factors that affect entry—such as entry regulations—could affect this profits convergence process. Using an unbalanced panel of firm- and country-level data for approximately 13,000 firms in 33 countries between 2005 and 2013, we examine the profit dynamics of incumbent firms in the context of entry and entry regulations.
Original languageEnglish
JournalReview of Industrial Organization
Volume57
Issue number3
Pages (from-to)537-558
Number of pages22
ISSN0889-938X
DOIs
Publication statusPublished - Nov 2020
Externally publishedYes

Keywords

  • Entry
  • Entrepreneurship
  • Entry regulation
  • Profit
  • Incumbent firm
  • Creative destruction

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