Edited by Manfred Neumann and Jürgen Weigand
Chapter 3: Entrepreneurship and competition policy
Competition policy in Europe and antitrust in the United States have been framed in terms of the structures and interactions of existing firms. From this perspective, entry barriers are a central concern of competition policy. However, the policy focus is limited to impediments to entry by incumbent firms, and rarely, if ever at all, to any deterrent impact on entrepreneurial activity, or the startup of new firms. Restricting the policy focus to the impact of incumbent firms certainly is consistent with the findings in the industrial organization literature indicating that startups play at best a marginal role in industries. For example, in his comprehensive survey on “What Do We Know About Entry?” Geroski (1995) finds that the actual amount of output in markets contributed by new entrants is trivial. He reports from an exhaustive empirical literature that the share of total industry sales accounted for by new entrants typically ranges from 1.45 to 6.36 percent. This would seemingly suggest that new entrants contribute insufficient additional output to provide a competitive threat to incumbent firms. Therefore, it would follow that policies fostering entrepreneurship, in the form of new firm startups, will have at best a minimal impact on enhancing competition in markets.
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