Review of Industrial Organization 14: 91–94, 1999.
Industrial Concentration and Performance: A Study of the Structure, Conduct, and
Performance of Indian Industry. Uma S. Kambhampati. Delhi: Oxford Univer-
sity Press, 1996, 212 pages, $25.00.
This study of Indian industry begins by questioning the performance of the 1965
Monopolies and Restrictive Trade Practices Act. The Act was designed to protect
industry from foreign competition while regulating domestic competition. Accord-
ing to Kambhampati, the prevailing perception is that industrial policy has failed
to promote allocative efﬁciency or to account for the dynamic dimension of com-
petition. Kambhampati asks if such a pessimistic view of industry is justiﬁed. The
question is answered with an extensive empirical study of Indian industry. The
study supplements tests based on the traditional, structure–conduct–performance
(SCP) paradigm with tests based on the dynamic, new institutional perspective.
Kambhampati accomplishes this Herculean task in 12 chapters, a mere 212 pages,
much of it consisting of tables and equations. Based on these empirical tests,
Kambhampati concludes that industrial policy has been successful in supporting
efﬁciency but not in curtailing market power. Market power and efﬁciency appar-
ently coexist in India’s highly concentrated industries. As a policy recommendation
she suggests Japanese style industrial management where state support for concen-
trated industrial structures is balanced by regulatory oversight. This review brieﬂy
describes the tests and results leading to Kambhampati’s recommendation. Due to
space limitations, my critical comments will be general rather than test-speciﬁc.
The ﬁrst three chapters provide background information. Chapter 1 describes
data sources, limitations and the scope of the study. The data set includes 42 in-
dustries from 1974 to 1985. A subset of 33 industries from 1981 to 1984 is used
when tests require additional information such as capacity utilization and advertis-
ing rates. Chapter 2 presents a succinct overview of the SCP framework followed
by critiques of the framework. Distinguishing characteristics of India’s industrial
environment, such as the level and patterns of demand, institutional environment,
the role of foreign competition, and the role of the state, are described in Chapter
3. The chapter concludes with a review of SCP studies in India.
The remaining chapters are divided into three parts. Part I (Chapters 4 to 7)
examines the determinants of structure as measured by concentration. Chapter 4
calculates concentration ratios (CR). The appendix to Chapter 4 presents an excel-