Market power or efficiency? An empirical study on the Indonesian fertilizer industry
This article aims to analyze the Indonesian fertilizer industry's market structure, efficiency, and performance determinants. This study applies the Structure-Conduct-Performance (SCP) framework proposed by the Harvard (market power) and UCLA-Chicago School (efficiency structure) schools of tho...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Universitas Kristen Satya Wacana
2021-10-01
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| Series: | Jurnal Ekonomi dan Bisnis |
| Subjects: | |
| Online Access: | https://ejournal.uksw.edu/jeb/article/view/3430 |
| _version_ | 1797654537773776896 |
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| author | Mohamad Egi Destiartono Evi Yulia Purwanti |
| author_facet | Mohamad Egi Destiartono Evi Yulia Purwanti |
| author_sort | Mohamad Egi Destiartono |
| collection | DOAJ |
| description | This article aims to analyze the Indonesian fertilizer industry's market structure, efficiency, and performance determinants. This study applies the Structure-Conduct-Performance (SCP) framework proposed by the Harvard (market power) and UCLA-Chicago School (efficiency structure) schools of thought. We run Data Envelopment Analysis (DEA) and panel data regression to analyze the panel data constructed from annual reports of fertilizer producers in 2008 – 2017 and statistical publications from the agriculture ministry. DEA is a nonparametric method that measures technical and scale efficiencies. Meanwhile, panel data regression estimates the determinants of firm performance (ROA). The results show that the fertilizer industry has market power based on three characteristics; the number of incumbents (five), degree of market concentration (95.48 percent), and barrier to entry condition. Meanwhile, its industrial technical efficiency score is low (0.584), but its scale efficiency score is high (0.950). The results also show that firm performance is determined by efficiency, not market power. Both technical and scale efficiency positively and significantly affect performance. On the other hand, market power does not significantly affect performance. This finding supports the UCLA-Chicago School that efficiency is the main factor of firm performance. |
| first_indexed | 2024-03-11T17:00:56Z |
| format | Article |
| id | doaj.art-09d7e8dce11f448eb85b7263b8e0e616 |
| institution | Directory Open Access Journal |
| issn | 1979-6471 2528-0147 |
| language | English |
| last_indexed | 2024-03-11T17:00:56Z |
| publishDate | 2021-10-01 |
| publisher | Universitas Kristen Satya Wacana |
| record_format | Article |
| series | Jurnal Ekonomi dan Bisnis |
| spelling | doaj.art-09d7e8dce11f448eb85b7263b8e0e6162023-10-20T08:41:48ZengUniversitas Kristen Satya WacanaJurnal Ekonomi dan Bisnis1979-64712528-01472021-10-0124236137810.24914/jeb.v24i2.34301914Market power or efficiency? An empirical study on the Indonesian fertilizer industryMohamad Egi Destiartono0Evi Yulia Purwanti1Faculty of Economics and Business, Diponegoro UniversityFaculty of Economics and Business, Diponegoro UniversityThis article aims to analyze the Indonesian fertilizer industry's market structure, efficiency, and performance determinants. This study applies the Structure-Conduct-Performance (SCP) framework proposed by the Harvard (market power) and UCLA-Chicago School (efficiency structure) schools of thought. We run Data Envelopment Analysis (DEA) and panel data regression to analyze the panel data constructed from annual reports of fertilizer producers in 2008 – 2017 and statistical publications from the agriculture ministry. DEA is a nonparametric method that measures technical and scale efficiencies. Meanwhile, panel data regression estimates the determinants of firm performance (ROA). The results show that the fertilizer industry has market power based on three characteristics; the number of incumbents (five), degree of market concentration (95.48 percent), and barrier to entry condition. Meanwhile, its industrial technical efficiency score is low (0.584), but its scale efficiency score is high (0.950). The results also show that firm performance is determined by efficiency, not market power. Both technical and scale efficiency positively and significantly affect performance. On the other hand, market power does not significantly affect performance. This finding supports the UCLA-Chicago School that efficiency is the main factor of firm performance.https://ejournal.uksw.edu/jeb/article/view/3430scpefficiencyperformancefertilizer industry |
| spellingShingle | Mohamad Egi Destiartono Evi Yulia Purwanti Market power or efficiency? An empirical study on the Indonesian fertilizer industry Jurnal Ekonomi dan Bisnis scp efficiency performance fertilizer industry |
| title | Market power or efficiency? An empirical study on the Indonesian fertilizer industry |
| title_full | Market power or efficiency? An empirical study on the Indonesian fertilizer industry |
| title_fullStr | Market power or efficiency? An empirical study on the Indonesian fertilizer industry |
| title_full_unstemmed | Market power or efficiency? An empirical study on the Indonesian fertilizer industry |
| title_short | Market power or efficiency? An empirical study on the Indonesian fertilizer industry |
| title_sort | market power or efficiency an empirical study on the indonesian fertilizer industry |
| topic | scp efficiency performance fertilizer industry |
| url | https://ejournal.uksw.edu/jeb/article/view/3430 |
| work_keys_str_mv | AT mohamadegidestiartono marketpowerorefficiencyanempiricalstudyontheindonesianfertilizerindustry AT eviyuliapurwanti marketpowerorefficiencyanempiricalstudyontheindonesianfertilizerindustry |