Policy reforms and evolution of market structure in an emerging economy: The case of India

Policy reforms have facilitated entry of quite a few transnational corporations (TNC) into Indian industries. This has important implications for the evolution of competitive industrial structure. This article focuses on the issues of the response mechanism of local firms to competition from new entrant TNCs, and the possible strategies of TNCs in penetrating the Indian market. It develops a conceptual framework by incorporating elements of intangible assets theory and new institutional economics into a simple sequential entry oligopoly model. This yields interesting insights into qualitative behaviour of firms in the post-reforms period. A few hypotheses drawn from the conceptual framework are empirically tested on the basis of firm-level panel data drawn from a set of Indian industries.