Sources of Market Power among Firms in Sub-Saharan Africa: Do Institutions Matter in Competitive Policies?

Abstract

In the context of a high prevalence of both poverty among households and business failures among firms in the majority of Sub-Saharan African (SSA) countries, competition is seen as one of the viable tools for transforming and improving these economies. This can be achieved by boosting productivity, improving output markets, increasing innovation and promoting economic growth. This study examines the sources of market power among firms within a variety of institutional settings using a large sample of data from 23 SSA countries. Tobit panel models comprising both fixed and random effects are used to estimate the determinants of market power. The study reveals that a large number of firms control less than 5 percent of the market with a few firms controlling between 5 and 34 percent of the market. At the same time, there are a small number of firms controlling between 30 and 100 percent of the markets in Sub-Saharan Africa. The findings further show that economic and political institutions significantly matter in the determination of power among firms in SSA. However, the influence of institutions varies significantly depending on the type of institutions and regional differences.

The Significance of Market Power in the Financial Sustainability of Emerging Agricultural Cooperatives in the Central Free State of South Africa: A Resource-based View

“…Studies still accede to the view that a firm's market power can easily be measured by its ability to keep and develop its market share in situations of competition (Salma and Younes 2014). The measures include market share and concentration-related approaches such as the Herfindahl-Hirschman Index (HHI) and the N-firm concentration ratio (Abdul and Jibir 2019;Autor et al 2020;Hirschman 1964). The HHI describes the index of the number of contending firms in the market and their market share (Kunwar 2018).…”

“…The HHI describes the index of the number of contending firms in the market and their market share (Kunwar 2018). The HHI is a measure of concentration that calculates the sum of the squared market shares of all firms in a market or industry (Abdul and Jibir 2019). The results are assumed to signal the probability of the level of concentration that may influence financial sustainability (Samuelson and Nordhaus 2001).…”

“…on several other factors that include the enterprise's size, type, location or complexity and the preferred nature of performance (whether quantitative or qualitative) to be measured against predetermined objectives(Abdul and Jibir 2019;Asongu and Adhiambo 2019;Zabolotnyy and Wasilewski 2019).…”