Entry and the Extent of Multiplant Operations

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There have been many studies of the effects of entry conditions on industry profitability, but few studies of the direct effects of entry conditions on entry.
The number of empirical studies of the determinants of entry has been small despite the importance of entry conditions in microeconomic theory. Orr's [7] study of the determinants of entry in Canadian manufacturing industries has been the most comprehensive work to date. This paper reports on a similar study of the determinants of entry in U.S. manufacturing industries between I963 and 1972. Among the potential determinants of entry that are examined, one of the most significant appears to be the extent of multiplant operations among established firms. The effect that the extent of multiplant operations can be expected to have on the prospects of potential entrants is explained in the next section of the paper. In subsequent sections a model of entry is adopted, the variables used to estimate the model are specified, and the empirical results are assessed.