Using a newly constructed dataset, this paper explores firm selection and the evolution of market structure in the Japanese motorcycle industry. An important feature of the industry is that the number of firms grew and then declined sharply for the first 20 years in the post-war era, and consequently the industry evolved to be an oligopoly. To address what factors caused a shakeout of producers and shaped the structure of the industry, we examine the determinants of firm exit by conducting a duration analysis. It is found that initial firm size and order-of-entry have significant effects on firm exit, and that the firms which made early and large-scale entry tend to have advantages over late and small entrants. It is also found that product strategies played an important role in firm survival and consequently contributed to shaping the structure of the industry. Furthermore, we provide evidence that firms with pre-entry experience tend to survive longer.
Dr. Kato is Assistant Professor at the Institute of Economic Research, Hitotsubashi University, Tokyo.