Market Structure and Competition: Assessment of Malaysian Pharmaceutical Industry based on the Modified Structure-Conduct-Performance Paradigm

This study assesses the market structure and competitiveness of Malaysian pharmaceutical industry. A panel analysis of 41 pharmaceutical manufacturing firms over 2004-2012 is conducted founded on the modified Structure-Conduct-Performance (SCP) framework. Our study reveals that the Malaysian pharmaceutical industry is highly concentrated (oligopoly) and the major findings are threefold. First, anti-competitive practices subsist among the pharmaceutical firms. Major players may have greater control over the markets and potentially colluded to gain better profits. Second, selling intensity is evident to raise the firms’ business performance, suggesting that advertisement, marketing campaigns, product differentiations and distribution efforts could be effective in building competencies over the rivals. Third, the study has tackled the endogeneity problem of traditional SCP with dual causal effects found between business conduct and business performance. Firms and authorities should consider the interactive mutual influences of structure-conduct-performance when formulating their respective management decisions and regulatory rules.