Shakeout and consolidation in wholesale distribution

Adam Jay Fein, University of Pennsylvania


Throughout the US economy, mature fragmented wholesale lines of trade have been rapidly consolidating, drastically altering the fortunes of individual companies and leading to more concentrated industry structures. Surprisingly, these evolutionary processes in wholesale distribution have largely escaped theoretical or empirical inquiry to date. Furthermore, we know little about the processes by which market structure evolves in non-manufacturing service industries such as wholesale distribution. This dissertation proposes and empirically investigates an evolutionary economic interpretation of shakeout and consolidation in wholesale distribution. My research design incorporates cross-sectional, longitudinal, and historical studies of shakeout and consolidation, enabling me to balance the complementary strengths and weaknesses of each method. In some of the 54 industries studied, disintermediation pressures have reduced the role of wholesaler-distributors in the channel, leading to shakeout and consolidation. In other industries, the same factors have led to a strategic renewal in wholesale distribution albeit one with fewer and larger players. Evolutionary economics provides an explanation for the paradoxical finding that the same factors that can squeeze wholesaler-distributors out of the channel have also improved the overall position of wholesale distribution. An economic history of pharmaceutical wholesaling reveals limited support for theories which posit a single technological innovation as the trigger of shakeout versus an alternative explanation based on evolutionary economics. Empirical analysis of exit for wholesaler-distributors in two industries also demonstrates significant differences between wholesale distribution and manufacturing industries. These observed patterns of exit, innovation, and growth suggest important modifications to evolutionary theories of market structure. Case studies of four active acquirers from four different lines of trade reveals the presence of the type of organizational competencies predicted by the evolutionary theory of the firm.

Subject Area

Business costs

Recommended Citation

Fein, Adam Jay, "Shakeout and consolidation in wholesale distribution" (1997). Dissertations available from ProQuest. AAI9814840.