Assessing The Competitiveness Of Pharmaceutical Industry In Malaysia Based On Structure-Conduct-Performance (SCP) Approach

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Date
2014
Authors
Chong, Hooi Ying
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Abstract
Anti-competitive practices arouse along the pharmaceutical supply chain in Malaysia due to no policies to regulate pricing on the non-essential drugs and private sector has raised some concerns. This present research makes an attempt to assess the competiveness of pharmaceutical industry in Malaysia based on the Structure-Conduct-Performance (SCP) framework. Apart from investigating the direct relationship between the three elements of SCP, the causal effects are also examined in accordance to the modern version of SCP. The panel regression estimation, Granger causality test and an unbalanced panel dataset of 41 pharmaceutical manufacturing firms over the period of 2004-2012 are employed in this present paper. The findings of the research revealed that pharmaceutical industry in Malaysia is classified as a highly concentrate market. It is observed that return on sales in lag two periods has significant positive effects on the degree of market concentration (HHI). While market share increases directly with its return on assets. Interestingly, the degree of concentration (HHI) is found to have significant negative influence on the selling intensity. On the other hand, capital intensity is inversely affected by the return on sales. Further, the degree of market concentration (HHI) can raise the return on sales and market share raises the return on assets respectively. In addition, the firms’ return on sales and return on assets are observed to increase with the selling intensity but inversely with the capital intensity. Also, the findings has evident the existence of causal effects between capital intensity and return on assets, thus, it is partially supporting the modern version of SCP framework. The findings have some important implications for the regulation authority and industry players.
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Competiveness of pharmaceutical industry , based on the Structure-Conduct-Performance
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