Pub Date : 2026-01-18DOI: 10.1016/j.ijindorg.2026.103257
Christopher Conlon
A popular narrative has attributed the post-COVID rise in inflation to a rise in corporate profits. The literature in industrial organization offers three reasons for price increases: greater demand, greater marginal costs, and softening of competition (conduct). I argue that only sensible interpretation of the “Profits-Inflation” hypothesis is that a change in firm conduct was the primary cause of inflation. However, I also find that most of the evidence cited in favor of the “Profits-Inflation” hypothesis, such as elevated profit margins or capital share of income, is unable to distinguish between increased demand and a change in the nature of competition.
{"title":"Did profits cause inflation?","authors":"Christopher Conlon","doi":"10.1016/j.ijindorg.2026.103257","DOIUrl":"10.1016/j.ijindorg.2026.103257","url":null,"abstract":"<div><div>A popular narrative has attributed the post-COVID rise in inflation to a rise in corporate profits. The literature in industrial organization offers three reasons for price increases: greater demand, greater marginal costs, and softening of competition (conduct). I argue that only sensible interpretation of the “Profits-Inflation” hypothesis is that a change in firm conduct was the primary cause of inflation. However, I also find that most of the evidence cited in favor of the “Profits-Inflation” hypothesis, such as elevated profit margins or capital share of income, is unable to distinguish between increased demand and a change in the nature of competition.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103257"},"PeriodicalIF":1.4,"publicationDate":"2026-01-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146024408","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-14DOI: 10.1016/j.ijindorg.2026.103256
Yiran Hao , Yu Hao
We study how BYD sustained stable price-cost margins of 19–23 % despite losing 74.6 percentage points of market share in Xi’an between 2014 and 2020—a pattern that diverges from standard IO theory predicting entry compresses both share and markups. Using transaction-level microdata, we estimate a structural model and develop a sequential counterfactual decomposition isolating seven drivers of market-share change. We find three core results. First, markup resilience stems from cost leadership: BYD’s vertically integrated battery production enabled aggressive price competition while maintaining profitability. Second, unobserved consumer preference shifts explain 47.9 % of the decline, vastly exceeding subsidy phase-outs (6.5 %). Third, the modest subsidy effect indicates successful infant-industry transition: by policy phase-out, BYD’s dependence had substantially waned. Our findings demonstrate that cost efficiency can decouple market share from profitability in technology-intensive industries.
{"title":"The dynamics of competition in the Chinese electric vehicle market: Insights from BYD’s market evolution","authors":"Yiran Hao , Yu Hao","doi":"10.1016/j.ijindorg.2026.103256","DOIUrl":"10.1016/j.ijindorg.2026.103256","url":null,"abstract":"<div><div>We study how BYD sustained stable price-cost margins of 19–23 % despite losing 74.6 percentage points of market share in Xi’an between 2014 and 2020—a pattern that diverges from standard IO theory predicting entry compresses both share and markups. Using transaction-level microdata, we estimate a structural model and develop a sequential counterfactual decomposition isolating seven drivers of market-share change. We find three core results. First, markup resilience stems from cost leadership: BYD’s vertically integrated battery production enabled aggressive price competition while maintaining profitability. Second, unobserved consumer preference shifts explain 47.9 % of the decline, vastly exceeding subsidy phase-outs (6.5 %). Third, the modest subsidy effect indicates successful infant-industry transition: by policy phase-out, BYD’s dependence had substantially waned. Our findings demonstrate that cost efficiency can decouple market share from profitability in technology-intensive industries.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103256"},"PeriodicalIF":1.4,"publicationDate":"2026-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145980411","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-08DOI: 10.1016/j.ijindorg.2026.103248
Gerard Llobet , Álvaro Parra , Javier Suarez
Using an industry-dynamics innovation model, we explore the interplay between patent screening and patent enforcement. When patent enforcement is imperfect, genuine sequential innovators may see their market access blocked by potentially abusive infringement claims from prior innovators. In this case, the patent’s office leniency towards obvious innovators may contribute to reduce the presence of blocking incumbent monopolists, encouraging innovation and improving welfare. This result is robust across multiple extensions of the baseline framework.
{"title":"Optimal patent screening with imperfect enforcement","authors":"Gerard Llobet , Álvaro Parra , Javier Suarez","doi":"10.1016/j.ijindorg.2026.103248","DOIUrl":"10.1016/j.ijindorg.2026.103248","url":null,"abstract":"<div><div>Using an industry-dynamics innovation model, we explore the interplay between patent screening and patent enforcement. When patent enforcement is imperfect, genuine sequential innovators may see their market access blocked by potentially abusive infringement claims from prior innovators. In this case, the patent’s office leniency towards obvious innovators may contribute to reduce the presence of blocking incumbent monopolists, encouraging innovation and improving welfare. This result is robust across multiple extensions of the baseline framework.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103248"},"PeriodicalIF":1.4,"publicationDate":"2026-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146079221","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-05DOI: 10.1016/j.ijindorg.2025.103246
Apoorva Gupta
Can being innovative help firms to shield themselves from the disruptive effects of a recession? Using data for Spanish manufacturing firms, this paper finds that in industries hit severely by the Great Recession, firms with prior investment in R&D performed relatively better than non-innovative firms during the recession. The resilience of innovative firms is explained by their ability to promptly introduce product innovations. These firms do not seem to engage in process innovation to lower costs or improve production efficiency to adapt to a negative demand shock. Consequently, being innovative matters most for resilience in industries with a high scope for product differentiation. Matching innovative and non-innovative firms within industry groups along several firm characteristics and their pre-recession growth trajectory, and controlling for firm financing constraints, product-market scope, differences in labour adjustment costs or management quality supports the findings. The paper, thus, provides evidence for how investment in R&D today helps firms to cope with a dramatically changed external environment.
{"title":"R&D and firm resilience during bad times","authors":"Apoorva Gupta","doi":"10.1016/j.ijindorg.2025.103246","DOIUrl":"10.1016/j.ijindorg.2025.103246","url":null,"abstract":"<div><div>Can being innovative help firms to shield themselves from the disruptive effects of a recession? Using data for Spanish manufacturing firms, this paper finds that in industries hit severely by the Great Recession, firms with prior investment in R&D performed relatively better than non-innovative firms during the recession. The resilience of innovative firms is explained by their ability to promptly introduce product innovations. These firms do not seem to engage in process innovation to lower costs or improve production efficiency to adapt to a negative demand shock. Consequently, being innovative matters most for resilience in industries with a high scope for product differentiation. Matching innovative and non-innovative firms within industry groups along several firm characteristics and their pre-recession growth trajectory, and controlling for firm financing constraints, product-market scope, differences in labour adjustment costs or management quality supports the findings. The paper, thus, provides evidence for how investment in R&D today helps firms to cope with a dramatically changed external environment.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103246"},"PeriodicalIF":1.4,"publicationDate":"2026-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145915370","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-01DOI: 10.1016/j.ijindorg.2025.103245
Chrysovalantou Milliou
This paper explores why competing firms outsource to an external common supplier that does not have a cost advantage relative to them in input production. The supplier, through its contract offers, manages to generate asymmetry, to alter product market competition, and to extract profits from the competing firms. Two-part tariffs and sequential contracting are both crucial for the emergence of outsourcing. The supplier purposefully avoids industry profit maximization to enlarge its profits share. Both consumer and total welfare benefit from the presence of an otherwise redundant supplier in the market.
{"title":"Outsourcing without cost advantages","authors":"Chrysovalantou Milliou","doi":"10.1016/j.ijindorg.2025.103245","DOIUrl":"10.1016/j.ijindorg.2025.103245","url":null,"abstract":"<div><div>This paper explores why competing firms outsource to an external common supplier that does not have a cost advantage relative to them in input production. The supplier, through its contract offers, manages to generate asymmetry, to alter product market competition, and to extract profits from the competing firms. Two-part tariffs and sequential contracting are both crucial for the emergence of outsourcing. The supplier purposefully avoids industry profit maximization to enlarge its profits share. Both consumer and total welfare benefit from the presence of an otherwise redundant supplier in the market.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"104 ","pages":"Article 103245"},"PeriodicalIF":1.4,"publicationDate":"2026-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145883709","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-01DOI: 10.1016/j.ijindorg.2025.103244
Alexander Rodivilov
This paper examines the optimal provision of incentives for contract designers and the implications for contractual design. A buyer hires an agent to draft a contract for a seller. The buyer-seller contract is incomplete because the ex-ante specified design might not be appropriate ex-post. The degree of contract incompleteness is endogenously determined by the effort exerted by the agent, who can manipulate the buyer’s beliefs because his effort is not observable (moral hazard), and because he is better informed at the outset (adverse selection). We discuss how the asymmetric information generated during the contract drafting stage explains some empirical observations and contracting phenomena in the construction industry and procurement.
{"title":"Incentives for contract designers and contractual design","authors":"Alexander Rodivilov","doi":"10.1016/j.ijindorg.2025.103244","DOIUrl":"10.1016/j.ijindorg.2025.103244","url":null,"abstract":"<div><div>This paper examines the optimal provision of incentives for contract designers and the implications for contractual design. A buyer hires an agent to draft a contract for a seller. The buyer-seller contract is incomplete because the ex-ante specified design might not be appropriate ex-post. The degree of contract incompleteness is endogenously determined by the effort exerted by the agent, who can manipulate the buyer’s beliefs because his effort is not observable (moral hazard), and because he is better informed at the outset (adverse selection). We discuss how the asymmetric information generated during the contract drafting stage explains some empirical observations and contracting phenomena in the construction industry and procurement.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"104 ","pages":"Article 103244"},"PeriodicalIF":1.4,"publicationDate":"2026-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145924920","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-01DOI: 10.1016/j.ijindorg.2025.103241
Ann Harrison , Peichun Wang , Minyuan Zhao , Marshall Meyer , Linda Zhao
The majority of state-owned enterprises (SOEs) in China were privatized through ownership reforms over the last three decades. Using a comprehensive dataset of all medium and large enterprises in China between 1998 and 2013, we show that privatized SOEs continue to benefit from government support relative to private enterprises. Compared to private firms that were never state-owned, privatized SOEs are favored by lower interest loans and higher government subsidies. Moreover, both SOEs and privatized SOEs significantly underperform relative to private firms, despite some improvements post-privatization. An exception is in improvements in productivity growth, where former SOEs match or exceed their private sector counterparts–results consistent with recent research. We also implement staggered difference-in-differences and matching estimation to account for treatment over multiple periods and selection into privatization. The tiger can change its stripes; however, former SOEs face a more supportive industrial policy regime relative to their private sector counterparts, affecting their performance.
{"title":"Can a tiger change its stripes? Reform of Chinese state-owned enterprises in the penumbra of the state","authors":"Ann Harrison , Peichun Wang , Minyuan Zhao , Marshall Meyer , Linda Zhao","doi":"10.1016/j.ijindorg.2025.103241","DOIUrl":"10.1016/j.ijindorg.2025.103241","url":null,"abstract":"<div><div>The majority of state-owned enterprises (SOEs) in China were privatized through ownership reforms over the last three decades. Using a comprehensive dataset of all medium and large enterprises in China between 1998 and 2013, we show that privatized SOEs continue to benefit from government support relative to private enterprises. Compared to private firms that were never state-owned, privatized SOEs are favored by lower interest loans and higher government subsidies. Moreover, both SOEs and privatized SOEs significantly underperform relative to private firms, despite some improvements post-privatization. An exception is in improvements in productivity growth, where former SOEs match or exceed their private sector counterparts–results consistent with recent research. We also implement staggered difference-in-differences and matching estimation to account for treatment over multiple periods and selection into privatization. The tiger can change its stripes; however, former SOEs face a more supportive industrial policy regime relative to their private sector counterparts, affecting their performance.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"104 ","pages":"Article 103241"},"PeriodicalIF":1.4,"publicationDate":"2026-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145883743","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-30DOI: 10.1016/j.ijindorg.2025.103247
Han Yuan
Mobile applications compete for scarce user time-a mechanism I term “budget competition”-regardless of functional similarity. Complementary apps are gross substitutes when budget competition dominates functional competition. I estimate a discrete-continuous demand model to quantify the two types of competition using overlapping user data from China in 2017. Exploiting app updates to identify complementarity, I find significant substitution between functionally independent apps, demonstrating that categories are often poor proxies for competition. While budget competition can be large in absolute terms, it is often small relative to functional competition. I discuss when budget competition may play a larger role.
{"title":"Competing for time: A study of mobile applications","authors":"Han Yuan","doi":"10.1016/j.ijindorg.2025.103247","DOIUrl":"10.1016/j.ijindorg.2025.103247","url":null,"abstract":"<div><div>Mobile applications compete for scarce user time-a mechanism I term “budget competition”-regardless of functional similarity. Complementary apps are gross substitutes when budget competition dominates functional competition. I estimate a discrete-continuous demand model to quantify the two types of competition using overlapping user data from China in 2017. Exploiting app updates to identify complementarity, I find significant substitution between functionally independent apps, demonstrating that categories are often poor proxies for competition. While budget competition can be large in absolute terms, it is often small relative to functional competition. I discuss when budget competition may play a larger role.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103247"},"PeriodicalIF":1.4,"publicationDate":"2025-12-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145980409","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-12DOI: 10.1016/j.ijindorg.2025.103230
Panle Jia Barwick , Hyuk-Soo Kwon , Shanjun Li , Yucheng Wang , Nahim Bin Zahur
This paper examines the impact of industrial policies (IPs) on innovation in the global automobile industry. We compile the first comprehensive dataset linking global IPs with patent data related to the auto industry from 2008 to 2023. We document a major shift in policy focus: by 2022, nearly half of all IPs targeted electric vehicles (EV)-related sectors, up from almost none in 2008. In the meantime, there has been a clear technological transition from internal combustion engine (GV) technologies to EV innovations. Our analysis finds a positive relationship between policy support and innovation activity. At the country level, a one-standard-deviation increase in five-year cumulative EV-targeted IPs is associated with a four-percent rise in new EV patent applications. Firm-level analyses indicate that a ten-percent increase in EV financial incentives received by automakers and EV battery producers leads to a similar four-percent increase in EV innovations. We confirm the importance of path dependence in the direction of technology change in the automobile industry but find no evidence that EV-targeted IPs stimulate innovation in GV technologies.
{"title":"Industrial policies and innovation: Evidence from the global automobile industry","authors":"Panle Jia Barwick , Hyuk-Soo Kwon , Shanjun Li , Yucheng Wang , Nahim Bin Zahur","doi":"10.1016/j.ijindorg.2025.103230","DOIUrl":"10.1016/j.ijindorg.2025.103230","url":null,"abstract":"<div><div>This paper examines the impact of industrial policies (IPs) on innovation in the global automobile industry. We compile the first comprehensive dataset linking global IPs with patent data related to the auto industry from 2008 to 2023. We document a major shift in policy focus: by 2022, nearly half of all IPs targeted electric vehicles (EV)-related sectors, up from almost none in 2008. In the meantime, there has been a clear technological transition from internal combustion engine (GV) technologies to EV innovations. Our analysis finds a positive relationship between policy support and innovation activity. At the country level, a one-standard-deviation increase in five-year cumulative EV-targeted IPs is associated with a four-percent rise in new EV patent applications. Firm-level analyses indicate that a ten-percent increase in EV financial incentives received by automakers and EV battery producers leads to a similar four-percent increase in EV innovations. We confirm the importance of path dependence in the direction of technology change in the automobile industry but find no evidence that EV-targeted IPs stimulate innovation in GV technologies.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"104 ","pages":"Article 103230"},"PeriodicalIF":1.4,"publicationDate":"2025-12-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145797045","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-11DOI: 10.1016/j.ijindorg.2025.103229
Xiao Fu , Ping Lin , Gaofen Ye
China’s industrial policy has evolved significantly since the 1980s, serving as a key driver for its technological catch-up and transition from a planned to market economy. Although government-backed sectors have achieved notable economic successes, these policies have also led to negative effects, including overcapacity, ineffective innovation support, and repeated investments ignoring comparative advantages. Recent central government decisions emphasize allowing market mechanisms to play a decisive role in resource allocation and prohibit local authorities from creating discriminatory policies. Looking ahead, China is expected to better coordinate industrial and competition policies, while developing strategic emerging industries and strengthening supply chain resilience through independent innovation and high-standard opening-up measures.
{"title":"Industrial policy in China: Its development and ongoing transformation","authors":"Xiao Fu , Ping Lin , Gaofen Ye","doi":"10.1016/j.ijindorg.2025.103229","DOIUrl":"10.1016/j.ijindorg.2025.103229","url":null,"abstract":"<div><div>China’s industrial policy has evolved significantly since the 1980s, serving as a key driver for its technological catch-up and transition from a planned to market economy. Although government-backed sectors have achieved notable economic successes, these policies have also led to negative effects, including overcapacity, ineffective innovation support, and repeated investments ignoring comparative advantages. Recent central government decisions emphasize allowing market mechanisms to play a decisive role in resource allocation and prohibit local authorities from creating discriminatory policies. Looking ahead, China is expected to better coordinate industrial and competition policies, while developing strategic emerging industries and strengthening supply chain resilience through independent innovation and high-standard opening-up measures.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"104 ","pages":"Article 103229"},"PeriodicalIF":1.4,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145797044","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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