Concentration and business dynamics in product markets

There is robust evidence that industry concentration has risen over recent decades. However, product market concentration is most relevant for competition. This paper measures concentration and business dynamism using novel data on sales of business groups (BGs) across detailed product markets in Europe. Industry concentration is strongly correlated with product concentration, suggesting it can serve as a reliable proxy. Product concentration is higher than industry concentration, but both increased in Europe between 2012 and 2021. Business dynamism among market leaders is lower in industries than in product markets but both have declined. Looking at the margins of sales growth of BGs across products, countries, and brands, most growth occurs in products and countries in which the group already operates. New brands developed or acquired by BGs account for a large portion of growth. Finally, when brands are acquired, their performance worsens relative to brands that were not acquired.