Concepts of Economic Competition and Performance in Context - Summary of Chapter 2 in Competition Diversity and Economic Performance : Processes, Complexities and Ecological Similarities

There is a common belief shared by many academics, business leaders and government officials that increased business competition promotes economic efficiency and stimulates economic growth. However, economic thought about this subject differs. Different views are discussed and a critical view is taken of the common belief. Particular attention is given to the industrial structure – business conduct – economic performance hypothesis which postulates that the existence of many competitive firms in an industry leads to conduct by business firms which ensures maximum economic efficiency and a high rate of economic growth. It is concluded that there is “no single uniform market structure that is ideal for promoting the economic performance of all industries, and ‘ideal’ structures may alter as an industry evolves. In particular, a market structure consisting of many competitive small firms (as assumed in perfect and pure competition) can retard the economic performance of many (but not all) industries. The situation is undoubtedly more complex than is recognized in mainstream economic theory