Doctoral Dissertations

Joo-Hoon Kang

Date of Award

6-1988

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Economics

Major Professor

Sidney L. Carroll

Committee Members

Anne Mayhew, J.W. Mayo, W.E. Cole, R.D. Sanders

Abstract

The purpose of this study was to develop a model that can be used to examine which factors might have affected consolidated firms' performance between 1905 and 1915. It was suggested that the structural barriers to entry by industrial conditions and strategic variables designed to erect barriers to entry played a key role in determining the performance of consolidated firms. This proposition was provided with econometric evidence by use of Tobit and probit regression analysis.

This study investigated both firms that succeeded in consolidations and those that failed. To account for the inclusion of failed firms, probit and Tobit regression models were constructed for the estimation of the relationship between consolidated firms' performance and their determinants. A variety of entry-deterring variables expected to influence consolidated firms' performance were discussed and tested. The structural variables expected to influence the consolidated firms' performance include vertical integration, economies of scale, capital requirements, and the extent of multiplant operation. Structural barriers to entry were measured quantitatively using Census of Manufactures (1905). The strategic variables designed to erect barriers to entry includes product differention, patents, and tariff protection which were evaluated qualitatively using Moody's Truth About the Trust (190A) and Manuals of Industrial Securities (1905-1915). The study has used data dealing with 228 consolidated firms in the probit model, 175 firms in the Tobit model, and 89 manufacturing industries.

The empirical results supported the proposition that structural conditions and artificial barriers to entry affected the consolidated firms' performance during 1905-1915. In particular, consolidated firms tended to be more successful when economies of scale of industry in which they were operating was larger. Consolidated firms engaged in a strategy of product differentiation could obtain significantly higher profit rates and tended to be successful.

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