Global Journal of Management and Business Research, B: Economics and Commerce, Volume 22 Issue 4

certain about its cost function and if unit-level costs of the entrant and the incumbent firm have adequate positive correlation, the limit price will be higher than the monopoly price and entry can be deterred by the incumbent by setting a price that is equal to or greater than the limit price. New players, in a bid to participate in production in an industry, must challenge certain barriers to entry. Porter (2008) posited that the entry barriers that would probably be confronted by a new entrant include “supply-side economies of scale”, “demand-side benefits of scale”, “customer switching costs”, “capital requirements”, “incumbency advantages independent of scale”, “unequal access to distribution channels”, and “restrictive government policy”(pp:26-28).Other researchers have demonstrated the existence and significance of entry barriers in various ways. Pehrsson (2009) observed that new entrants to an industry acknowledge the existence of entry barriers and respond both by selecting a broader product/market scope and by differentiating its products to a greater degree than executed by initial entrants. Ceccagnoli (2009) demonstrated that sturdier appropriability at the level of the firm, accomplished via patent protection or the proprietorship of dedicated complementary resources, results in greater financial performance, as evaluated by the market valuation of the equity of an organization's R& D assets. Rosenbaum & Lamort (1992) demonstrated that entry barriers of product differentiation diminish rates of entry, and costs associated with sunk capital lower rates of exit. Dreher & Gassebner (2013) indicates that the occurrence of proliferation of procedures mandatory for starting a business, and a more immense minimum amount of capital required to bring a business to reality are damaging to the evolution of entrepreneurship or new entrants in an industry. Robinson & Phillips McDougall (2001) observed the mediating impacts of the stage of the industry life cycle and entrepreneurial strategy on the discrepancy in firm profitability and organizational growth. Burke & To (2001) demonstrated that investment in endogenous barriers to entry and wage ceilings on executive salaries might enhance market performance. There are other sources of entry barriers, as demonstrated in a plethora of research works, though they are closely related to the entry barriers identified by Porter (1980). Schmalensee (2004) postulated that an increment in the significance of sunk cost is associated with a reduction in the attractiveness of entry, making it plausible in some policy set tings to infer that sunk cost generates a barrier to entry. Eaton & Lipsey (1980) demonstrated that the durability of capital is a source of entry barriers. Mueller & Tilton (1969) demonstrated that research and development costs are a specific form of entry barrier arising primarily from the existence and degree of economies of scale in research and development activities and secondarily in the buildup of patents and knowledge by the incumbent firm. Eswaran (1994) demonstrated that an existing firm in a market susceptible to the threat of entry could capitalize on its first-mover advantage by incentivizing firms not including probable entrants but those that would otherwise not enter the industry to purchase a license to its technology in order to deter entry, effectively instituting licensing as a form of entry barrier to certain potential entrants. Porter (2008) asserts that the threat of entry is dependent on the height of barriers to entry and the expected reaction of the incumbents to entry. Porter (1980) went further to assert that high entry barriers and the accompanying low threat of entry generate an auspicious environment for enhancement in firm performance. This assertion is consistent with the line of thought of several researchers. Schivardi & Viviano (2011) found that entry barriers are accompanied by considerably greater profitability and lesser efficiency of existing firms. Sharma & Gadenne (2010)demonstrated that prevailing organizations' capacity for creating barriers to entry enables amplified opportunities for advancing their corporate performance and that the extent of executing quality management is positively related to entry barriers, diminishing the depth of threat of entry that could arise from new competitors. Sharma & Gadenne (2010), additionally demonstrated that organizations with great depths of managerial commitment to quality management and those that closely focus on the needs of customers have a proclivity for enhancing their competitive position. Cool, Röller & Leleux (1999) demonstrated that potential rivalry substantially diminished the profitability of organizations in the pharmaceutical industry in a study that spanned a twenty-year period. The effectiveness of entry barriers can be influenced by a number of moderating variables. The effectiveness of capital as a source of entry barrier is critically contingent upon its durability (Eaton & Lipsey, 1980).Eaton & Lipsey (1980) defined the durability of capital as a particular capital commitment to a market over periods of time (intertemporal), in amalgamation with reducing costs. They, further, posited that an active strategy regarding capital durability and capital replacement is essential for maintaining a firm’s market power position. The effectiveness of regulations as an entry barrier can be mitigated by corruption. Dreher & Gassebner (2013)examined whether bribery and corruption diminish the unfavorable effects of regulations on entry into exceedingly regulated economies and demonstrated that corruption makes it easier for firms to enter highly controlled economies. Schnell (2004) found that an industry’s environment, and an entrant's goals, attributes, and strategies impact the success of entry barriers in impeding entry into the unregulated airline industry. The Determinants of the Attractiveness of an Industry: An Extension of The Porter’s Five-Forces Framework 86 Global Journal of Management and Business Research Volume XXII Issue IV Version I Year 2022 ( ) B © 2022 Global Journals