Review of Industrial Organization (2006) 28:165–182 © Springer 2006
Market Share Instability and the Dynamics
of Competition: A Panel Data Analysis
of Japanese Manufacturing Industries
and YUJI HONJO
Graduate School of Commerce and Management, Hitotsubashi University, 2-1 Naka,
Kunitachi, Tokyo 186-8601, Japan;
Faculty of Commerce, Chuo University, 742-1
Higashinakano, Hachioji, Tokyo 192-0393, Japan.
Author for correspondence. E-mail: firstname.lastname@example.org
Abstract. This paper explores market share instability as a measure of market mobility.
Using a newly constructed panel data set, we examine the determinants of the market
share instability of leading ﬁrms in Japanese manufacturing industries. The ﬁndings sug-
gest that there is a signiﬁcant relationship between concentration and market share insta-
bility, and the market shares of leading ﬁrms are more stable in highly concentrated
industries. We also provide evidence that industry growth has a signiﬁcantly positive effect
on market share instability.
Key words: Competition, concentration, instability, market share, mobility, panel data.
JEL Classiﬁcations: L10, L60.
This paper explores market share instability as a measure of market
mobility. Using a newly constructed panel data set, we examine the deter-
minants of market share instability of leading ﬁrms to address the dynam-
ics of competition in Japanese manufacturing industries. In particular, we
attempt to identify the relationship between industry concentration and
market share instability.
In the ﬁeld of industrial organization, a number of empirical studies
have been devoted to investigating the relationship between concentration
and market share instability, but these studies have not always yielded con-
sistent results. Part of this may relate to the different deﬁnitions of market
share used, including whether the market share indices reﬂect “absolute”
or “relative” instability. For instance, while “absolute instability” uncon-
trolled for concentration class biases tends to lead to greater instability
in the market shares of leading ﬁrms in concentrated industries, “relative