Market Concentration and Enterprise Profitability in the Croatian Economy

Economic literature, related to the empirical inquiry into the enterprise performance, is largely focused to the role of the industry (market) structure. Many different authors have tried to establish relationship(s) between the enterprise performance (measured by different indicators) and the characteristics of the industry structure (usually represented by one of the concentration ratios). The lack of the similar studies for the case of Croatia, has motivated us to conduct a similar research on the sample of large Croatian enterprises. The research results have led to the following conclusions: 1. Between enterprise profitability (presented with profit margin and return on assets) and market concentration (presented with four firm concentration ratios based on sales revenue, assets and number of employee) exist statistically significant positive relationship, which is, contrary with expectation, relatively weak. 2. Although different type of mathematics function were used during evaluation of the relationship between enterprise profitability and market concentration, it appears that linear function represents the connection in the most appropriate way. 3. If the profitability is measured in terms of profit margin and return on assets, the difference among enterprise in high and low concentrate industry exist (separation was done in dependence whether concentration ratio go beyond 60%).