Review of Industrial Organization 18: 427–444, 2001.
© 2001 Kluwer Academic Publishers. Printed in the Netherlands.
Market Leadership Volatility in Japanese Industries
Department of Economics, Kwansei Gakuin University Nishinomiya, 662-8501 Japan
Abstract. The paper computes the extent of market leadership volatility by industry, and then
examines the determinants of volatility in Japanese manufacturing industries. Volatility varies from
industry to industry, and changes over time in many industries. Concentration coexists with less
volatility, suggesting that the former has a policy signiﬁcance. Concentration change has a signiﬁcant
and positive effect. Exports have a volatility-promoting effect, but imports have no effect. Industry
size tends to decrease volatility. The effect of industry growth is not found. Advertising, R&D and
distribution channel have no deﬁnite effect respectively as well.
Key words: Concentration, dominant ﬁrms, dynamic competition, market leadership volatility.
In recent years, the changes in the relative position of ﬁrms are receiving more
interest in the industrial organization economics. The surging interest is likely to
reﬂect the impacts of the large changes in economic structure such as technolo-
gical progress and globalization.
The trends are likely to disturb the advantages
of leading ﬁrms or incumbent ﬁrms. In other words, even concentrated industries
may have higher mobility of ﬁrms’ positions and shares, which is likely to lead
to greater competition. As suggested by Davies and Geroski (1997), higher and
stable concentration may conceal considerable mobility of market leadership. Also,
new developments of competition theory suggest empirical studies of competitive
dynamism. The dynamic effects may be captured by the changes in the relative
position of ﬁrms in an industry. The dynamism is difﬁcult to be captured by
concentration ratio, which is a static measurement at a given point in time.
Also, leadership mobility is interesting from the view of corporate motives in
Japan. Japanese ﬁrms have traditionally taken a longer-term to building a busi-
Professor of Economics, Department of Economics, Kwansei Gakuin University, Nishinomiya,
662-8501 Japan. Tel. & Fax: +81 798 54 6316; E-mail: firstname.lastname@example.org
The author is indebted to the Fair Trade Commission (JFTC) for granting me special permission to
use JFTC’s unpublished data. The paper was written under JFTC’s permission. But, the permission
does not necessarily mean that JFTC concurs in the view he has expressed here. Also, the two
anonymous referees’ comments signiﬁcantly improved the paper. He retains sole responsibility for
any errors and omissions.
For examination of the effects of recent changes in economic structure on industrial organiza-
tion, for example, see FTC (1996).