Review of Industrial Organization
12: 335–354, 1997.
1997 Kluwer Academic Publishers. Printed in the Netherlands.
Domestic Market Structure and Performance in
Global Markets: Theory and Empirical Evidence
from U.S. Food Manufacturing Industries
Korea Rural Economic Institute, Seoul, Korea
BRUCE W. MARION
Department of Agricultural Economics, University of Wisconsin-Madison, U.S.A.
Abstract. This paper formally articulates Porter’s hypothesis that the degree of competition in domes-
tic markets is positively linked to performance in international markets. Hypotheses are tested using
measures of the trade performance of U.S. food manufacturing industries as proxies for international
competitiveness. Empirical results are generally consistent with Porter’s hypothesis; net export share
is negatively related to industry concentration. The competitiveness of agricultural inputs, R&D
intensity, and trade barriers of other countries were also found to be important determinants of the
performance of these industries in global markets.
Key words: International competition, market structure, industrial organization, competitiveness,
food manufacturing, trade.
Improving the international competitiveness of U.S. ﬁrms and industries has
become a frequently embraced policy goal as imports have exceeded exports since
the 1970s. Several studies have attempted to evaluate the competitive position of
the U.S. and to identify the determinants of success in global markets.
One approach to studying international competitiveness is to relate macro-
economic variables to the performance of a nation in global markets. This research
often assumes that increased trade deﬁcits in the U.S. can be explained mainly by
relatively high interest rates and overvaluation of the U.S. dollar during certain
Although this approach is relevant for designing monetary and ﬁscal policies,
it has limitations in explaining the global performance of industries or ﬁrms. At
the industry or ﬁrm level, macro-economic variables may explain only a small
The authors are Research Associate at Korea Rural Economic Institute, Seoul, Korea, and Pro-
fessor at the Department of Agricultural Economics, University of Wisconsin-Madison, respectively.
Relevant studies are The President’s Commission on Industrial Competitiveness (1985), Scott
and Lodge (1985), Spence and Hazard (1988), Hilke and Nelson (1988), Porter (1990a), and Lenz
(1991), to name a few.