Competitive Pressure, Productivity Growth, and Competitiveness
Competitive pressure has also been shown to stimulate scale efficiency. In particular, it has been proposed that competitive pressure, primarily from import competition, forces scale-inefficient firms to grow to efficient production levels or to exit the industry. Hypothesizing that competitive pressure has a structural rather than a temporal effect on productivity growth implies that firm-level technical or scale inefficiency and laggard innovative activity may persist in the absence of pressure from competition. Competitive pressure has been regarded as a positive influence on technological progress. Pressure from competition is the power propelling Cochrane’s agricultural treadmill where firms are forced to innovate in the face of decreasing prices or exit the industry. A comparative analysis of productivity growth rates over the sixteen year period 1970–1985 and across the two groups of crops provides a direct test of the relationship between competitive pressure and productivity growth.