Minimum efficient scale

Abstract: Part 1 Introduction. Part 2 Measurement: The Longitudinal Data Base: Introduction The Longitudinal Data Base File Editing Reliability Comparisons A Note on Measuring Innovative Activity Conclusions. Part 3 New Firms: Introduction Why Firms Exist The Traditional View of Entry Asymmetric Information, Transaction Costs, and the Principal Agent Relationship New-Firm Startups Over Time and Across Industries The Model Results Conclusions. Part 4 Survival and Growth: Introduction Firm Selection Post-Entry Performance of New Firms Firm Growth and Survival Semiparametric Hazard Duration Model Conclusions. Part 5 Entrepreneurship: Introduction Measuring Entrepreneurship Innovation, Scale Economics, and Entrepreneurship Empirical Results Conclusions. Part 6 Compensating Strategies: Introduction Minimum Efficient Scale and Suboptimal Plant Share Suboptimal Plants and Compensating Factor Differentials Empirical Results for the United States Empirical Results for Japan Conclusions. Part 7 Who Exits and Why: Introduction Displacement and the Revolving Door Measurement The Age Cohort of Exiting Firms Conclusions. Part 8 Conclusions: Major Findings Broader Implications.

Abstract: This paper utilises the non-parametric frontier approach, data envelopment analysis, to analyse the technical and scale efficiency in Japanese banking using a recent cross-section sample. Efficiency analysis is conducted across individual banks, bank types and bank size groups. Following Berger and Humphrey [Eur. J. Oper. Res. 98 (1997) 175], problem loans are controlled for as an exogenous influence on bank efficiency. Powerful size-efficiency relationships are established with respect to both technical and scale efficiency. Furthermore, the logic of the recent large-scale merger wave in Japan is questioned as the larger (City) banks are generally found to be operating above the minimum efficient scale and to have limited opportunity to gain from eliminating X-inefficiencies. The opposite result is found for the smaller banks. Finally, the results suggest that controlling for the exogenous impact of problem loans is important in Japanese banking, especially for the smaller regional banks.

Abstract: Over 70 empirical studies of entry and exit patterns covering eleven different countries generally support the expectation that entry is more frequent in more profitable, rapidly growing industries, and slower where the absolute costs of capital required to build a minimum efficient scale plant are imposing. Scale economies, excess capacity, and limit pricing receive little empirical support as entry impediments. The evidence concerning the effects of advertising and R&D intensity is confusing. Exit is faster where profits are lower, and slower where durable specific (sunk) capital costs are more important. Exit and entry are strongly correlated, probably due to displacement (of incumbents by more efficient entrants) and vacuum effects (in which entrants are enticed by the prospects of selling to uncommitted customers abandoned by a recent exit).

Abstract: This book presents the results of a project designed to link changes in trade policy with patterns of producer entry, exit, and adjustment characterizing developing country producers, using plant-level data, which reveals micro aspects of the relation between commercial policy and industrial sector performance. The researchers used data gathered from the manufacturing sector of five countries, Chile, Colombia, Morocco, Turkey, and Mexico to pursue the question of how industrial sectors in developing countries evolve. The country studies are collected in part 2, with an overview provided in chapter 8 of the same part. Part 1 draws together evidence on a single issue from a number of countries, focusing on the employment shifts that result from the entry, growth, and exit of manufacturing plants; addressing the cross-firm differences in productivity at the micro level; and quantifying how the turnover process sorts out efficient and inefficient producers. Other chapters address the sources of heterogeneity across producers, with emphasis on the role of economies of scale and foreign direct investment. Chapter 1 summarizes the main lessons, particularly, that the degree of producer turnover in the manufacturing sectors of semi-industrialized countries is on average GREATER than that found in industrialized countries, so the competitive pressures are at least as great. Furthermore, the countries relatively open to trade examined in this research show no evidence that imports contribute additional pressure at the margin. Rather, dying plants become progressively less productive in their final years while new plants that survive improve rapidly. Since a large fraction of the manufacturing sector turns over within five to ten years, policies that inhibit this replacement process probably have substantial medium- and long-term detrimental effects on productivity.