Minjae Song
Georgia Institutes of Technology
Prepared for the 2007 TAPPI/PIMA Conference

z z
Analyze the dynamics of the printing industry with respect to competition and firm turnover.
Compare the quick and the digital printing industries
–
–
–
Are they different with respect to the turnover rate?
The quick printing is an example of an established industry
The digital printing is an example of a young and growing industry.

z z
The quick printing industry comprises establishments primarily engaged in traditional printing activities , such as short-run offset printing or prepress services, in combination with providing document photocopying service.
– These establishments, known as quick printers, generally provide short-run printing and copying with fast turnaround times .
The digital printing industry comprises establishments primarily engaged in printing graphical materials using digital printing equipment .
–
Establishments known as digital printers typically provide sophisticated prepress services including using scanners to input images and computers to manipulate and format the graphic images prior to printing .

z z
Turnover rate at period t = (n t
-n t-1
) / n t-1 n t
= The number of establishment divided by market population at period t.
z Each state is defined as a market.
–
51 markets per period z The sample period is from 1998 to 2002.

z Use the number of establishment (per capita) as a competition index.
z Given demand and supply conditions, more establishments means a more competitive market.
z (n t
-n t-1
) / n t-1
= f(…, n t-1
,…)

z Focus on the impact of competition on the turnover rate.
–
Suppose there are two markets with the same demand and supply conditions.
–
If one market is more competitive than the other, we expect to see less entry and more exit, therefore a lower turnover rate. z Compare this effect between the quick and digital printing industries.

z z z z
Use US Economic Census data from 1998 to 2002.
Business census data (NAICS 7 digit) provides information on
–
– the number of establishments the number of employees per establishment
Each state is treated as a separate market, so there are 51 markets to compare.
Census data on state-level variables (population, income, gas price, energy price, etc) are also used to control demand and supply conditions.

1998 1999 2000 2001 2002
29.07
27.62
25.73
25.74
28.11
Quick
Printers
Digital
Printers
1.59
1.56
1.67
2.05
2.42

Quick Printing
1998
1999
2000
2001
2002
CA (1,132) FL (603)
CA (1,095) FL (569)
CA (1,028) FL (534)
CA (1,015) FL (555)
CA (1,105) FL (615)
Digital Printing
CA (57)
CA (60)
CA (65)
CA (99)
CA (126)
NY (35)
NY (36)
NY (35)
NY (36)
NY (59)

1998
1999
2000
2001
2002
Quick Printing
1. DC
1. DC
2. RI
2. RI
1. DC
1. DC
1. DC
2. RI
2. RI
2. VT
Digital Printing
1. DC
1. DC
2. VT
2. VT
1. DC
1. NV
1. NV
2. WY
2. MT
2. RI

z z z z
Quick Printing
–
Turnover t
= -0.003
× n t-1
+……
Digital Printing
–
Turnover t
= -0.095
× n t-1
+……
Looks like the competition effect is larger in the digital printing industry.
But the coefficient should be divided by the average turnover rate to get a correct magnitude.

z z z
Quick Printing
–
When the number of establishment per capita goes up by 1, the turnover rate goes down by 187.50%.
Digital Printing
–
When the number of establishment per capita goes up by 1, the turnover rate goes down by 54.85%.
The effect of one more establishment (per capita) on the turnover rate is much more significant in the quick printing industry.

z adj_n t
= The number of total employees divided by state population
–
No establishment level effect z z adj_Turnover t
Quick Printing z
– adj_Turnover t
Digital Printing
–
Adj_Turnover t
= (adj_n t
-adj_n t-1
) / adj_n t-1
= -0.000233
× adj_n t-1
+……
= -0.013
× adj_n t-1
+……

z z z
Quick Printing
–
When the number of employees per capita goes up by 1, the turnover rate goes down by 2.43%.
Digital Printing
–
When the number of employees per capita goes up by 1, the turnover rate goes down by 3.87%.
The two industries do not show much difference when the number of establishment per capita is adjusted by the number of employees.

z Significantly different competition effects at an establishment level between the two industries.
–
The effect is much larger in a more established industry z z
This difference goes away at an employee level
This suggests that the competition effect is only relevant at an establishment level.