A Key Driver of Growth and International Competitiveness?
Chapter 6: Industry structure
Why focus on the structure of aerospace industries? The world’s aerospace industries have different industrial structures. How do economists explain the structure of an industry? Does economic analysis offer any guidelines for public policy towards industrial structures and which is the ‘best’ industrial structure? These are some of the issues addressed in this chapter. Industry structure determines its performance. This chapter reviews the contribution of industrial economics to the analysis of aerospace industries. Examples are taken from the US, European and UK aerospace industries. Significantly, aerospace industries depart from the economist’s model of the perfectly competitive industry. Instead, aerospace industries are typically monopoly or oligopoly industries supplying military markets which are dominated by national governments and civil markets dominated by large numbers of airlines. Ownership differs with some firms, industries and airlines being privately-owned and others being state-owned. Various economic models can be applied to aerospace industries and these are reviewed in this chapter. It starts by explaining the industry structure–conduct–performance model and some of the newer developments. A starting point for analysing an industry is the industry structure–conduct–performance model of industrial economics (SCP paradigm: Tisdell and Hartley, 2008). Using this approach, an industry is analysed in terms of its: Structure comprising the number of firms and their size together with entry and exit conditions for the industry.
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