Market Structure, Technical Efficiency and Performance: An Empirical Study of E-commerce in China

The purpose of this paper is to examine whether market structure or technical efficiency is correlated with the performance of e-commerce in China. The paper estimates technical efficiencies by using input-oriented data envelopment analysis (DEA) model. The fixed effect panel regressions by the estimation of pool least square (PLS) are employed to test the relationship of market structure, technical efficiency and performance. The findings indicate that market structure of e-commerce in China undergoes transition from monopoly to oligopoly. Meanwhile, overall technical inefficiencies are not only caused by poor pure technical efficiency but also unsuccessful operation at decreasing returns to scale. The results also show that market structure and market size have an insignificant relationship with performance; but market share and pure technical efficiency have a significant positive effect on performance; and scale efficiency has a negative effect on the performance. Therefore, modified efficient structure (MES) hypothesis holds in China.