Relations and Profits: The Social Organization of Israeli Industrial Competition

This paper examines a structural theory of industrial organization and operation. The analytical approach taken is largely based on the premise that industry is embedded in the social structure of market competition. Moreover, imperfect competition and industrial resource dependence are composed of and reflected in interindustrial transaction patterns. Using network models of imperfect competition, this study explains the determinants of Israeli industrial performance. The first part of this paper inquires into the structure of interindustrial relations using structural equivalence as a diagnostic tool. In the second part structural determinants of industrial profitability are estimated. Profitability is predicted by the degree of control an industry has over its domestic transactions and its linkage to the world economy. Implications of this study for the theoretical models of social competition and for an empirical analysis of markets and firms are discussed.