UNIVERSITI PUTRA MALAYSIA

INDUSTRY STRUCTURE AND MARKET PERFORMANCE OF THE MALAYSIAN CONSTRUCTION INDUSTRY

NURUL AFIFAH AB AZIZ

FEP 2015 36

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INDUSTRY STRUCTURE AND MARKET PERFORMANCE OF THE

MALAYSIAN CONSTRUCTION INDUSTRY

By

NURUL AFIFAH AB AZIZ

Thesis Submitted to the School of Graduate Studies, Universiti Putra Malaysia, in

Fulfilment of the Requirements for the Degree of Master of Science

April 2015

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unless otherwise stated. Use may be made of any material contained within the thesis for

non-commercial purposes from the copyright holder. Commercial use of material may

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Copyright © Universiti Putra Malaysia

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Abstract of thesis presented to the Senate of Universiti Putra Malaysia in fulfilment of

the requirement for the degree of Master of Science

INDUSTRY STRUCTURE AND MARKET PERFORMANCE OF THE

MALAYSIAN CONSTRUCTION INDUSTRY

By

NURUL AFIFAH AB AZIZ

April 2015

Chairman : Azman Hassan, PhD

Faculty : Economic and Management

The construction sector is one of the important sector in the Malaysian economy in

terms of its contribution to the Gross Domestic Product (GDP). This study analyse the

industry structure and its performance using the Structure-Conduct Performance

paradigm approach. The market concentration measurements, measures namely;

Concentration Ratio (CR), Herfindahl Hirschman Index (HHI), Hanna and Kay Index

(HK), Entropy Index (EI), and GINI Coefficient (GINI). Economic profit is used to

determine the relationship between the industry structure and its performance. The

profitability of an industry is considered as average rate of return on capital which will

evaluate industry performance. The profitability of the industry has shown high

correlation with the market concentration and market share.

This study estimate from year 2000 until 2012 and data obtained from the annual

report of the construction firm’s listed in Kuala Lumpur Stock Exchange Market

(BURSA Malaysia). Panel data analysis estimation results showed that the random

effect model is the most appropriate model.

For this period, CR4 and CR8; HHI; HK; and GINI, shows that the construction

industry is moving towards a concentrated market structure and indicative of oligopoly

market. The Entropy index shows that the industry is moving towards the non-

competitive market. Results from panel data regression shows that the market share

and market concentration are significant in determining the profitability of the large

firm. The entry barrier is also found to be significant as represented by the positive

effect of market concentration and market share. We concluded that the construction

industry has an oligopolistic characteristic with less number of firms, and high

profitability due to high degree of concentration level.

Empirical findings have provided some basis of the industry structure based on the

determination of concentration level in the Malaysian construction industry. The result

can bring some amendments to the policy measure in order to ensure that the market

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structure does not involve monopolistic practices. Many factors which influence the

non-competitive market structure, such as the absence of the policy implementation

and do the policy favour the potential of dominant firm. This analysis can provide

some regulation and policy implications that are parallel with the government’s

objective in ensuring a more competitive industry in the economy as a whole.

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Abstrak tesis yang dikemukakan kepada Senat Universiti Putra Malaysia sebagai

memenuhi keperluan untuk ijazah Master Sains

STRUKTUR INDUSTRI DAN PRESTASI PASARAN DI DALAM INDUSTRI

PEMBINAAN DI MALAYSIA

Oleh

NURUL AFIFAH AB AZIZ

April 2015

Pengerusi : Azman Hassan, PhD

Fakulti : Ekonomi dan Pengurusan

Sektor pembinaan merupakan salah satu sektor penting dalam ekonomi Malaysia dari

segi sumbangannya kepada Keluaran Dalam Negara Kasar. Kajian ini menganalisis

struktur industri pembinaan Malaysia untuk menentukan struktur industri dan prestasi

menggunakan pendekatan prestasi Struktur-Kelakuan paradigma. Terdapat pelbagai

ukuran penumpuan pasaran untuk mengukur struktur pasaran, iaitu; Nisbah

Penumpuan (CR), Indeks Herfindahl Hirschman (HHI), Indeks Hanna dan Kay (HK),

Indeks Entropi (EI), dan Pekali GINI (GINI). Ukuran penumpuan pasaran yang

berbeza akan menerangkan keputusan yang berbeza. Keuntungan ekonomi digunakan

untuk menentukan hubungan antara struktur industri dan prestasinya. Keuntungan di

dalam sesebuah industri adalah dianggap sebagai purata kadar pulangan ke atas modal

yang akan menilai prestasi industri keseluruhannya. Oleh itu, keuntungan industri telah

menunjukkan korelasi yang tinggi dalam menentukan prestasi industri.

Kajian ini menggunakan pengkalan data setiap firma pembinaan dari tahun 2000

hingga tahun 2010, yang diperolehi daripada laporan tahunan Pasaran Saham Kuala

Lumpur (BURSA Malaysia). Keputusan anggaran analisis data panel mendapati

bahawa model kesan rawak adalah model yang terbaik dan paling sesuai untuk

membuat penilaian.

Sepanjang tempoh tersebut, CR4 dan CR8; HHI; HK; dan GINI, menunjukkan bahawa

struktur pasaran industri pembinaan adalah tepu dan menyerupai pasaran oligopoli.

Sementara itu indeks Entropi yang menunjukkan bahawa industri adalah adalah ke arah

pasaran yang tidak kompetitif. Keputusan daripada regresi data panel menunjukkan

bahagian pasaran dan penumpuan pasaran adalah signifiken dalam menentukan

keuntungan firma besar. Halangan kemasukan juga didapati signifikan sepertimana

ditunjukan oleh kesan positif penumpuan pasaran dan bahagian pasaran. Kami

menyimpulkan bahawa industri pembinaan mempunyai ciri oligopoli dengan jumlah

firma yang rendah, dan memperolehi keuntungan yang tinggi kerana tahap penumpuan

adalah tinggi.

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Penemuan empirikal telah memberikan beberapa asas struktur industri berdasarkan

penentuan tahap penumpuan industri pembinaan di Malaysia. Hasilnya boleh

membawa kepada beberapa pindaan pada langkah dasar bagi memastikan bahawa

struktur pasaran tidak melibatkan amalan monopoli. Banyak faktor yang

mempengaruhi struktur menjadi pasaran yang tidak kompetitif, seperti ketiadaan

pelaksanaan dasar sesuatu polisi dan tidak ada polisi yang membanteras kepada potensi

firma dominan. Analisis ini boleh memberi beberapa implikasi terhadap peraturan dan

dasar implikasi yang selari dengan matlamat kerajaan dalam menyampaikan industri

yang berdaya saing.

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ACKNOWLEDGEMENTS

Praise Allah for the most merciful and grateful. I would like to express my appreciation

to my supervisor Dr. Azman Hassan and my committee member Dr. Zaiton Ali. Thank

you for the advice and guidance in the time I accomplish the journey of my research. I

would like to express my special appreciation to my former supervisor, Dr. Suhaila

Abd Jalil for encouraging my research journey and for teaching me to grow as a good

researcher.

A special thanks to all of my family members. To my husband, thanks for being part of

my research journey. To my beloved children, this would be the knowledge that I will

impart to them in the future.

I would like to thank all of my friends for your support, comments, suggestions and

enjoyable moments. All of you have been there even during hardship.

Lastly, I would like to express my appreciation to the Faculty of Economics and

Management, Universiti Purta Malaysia, for giving me a chance to gain some

knowledge.

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This thesis was submitted to the Senate of Universiti Putra Malaysia and has been

accepted as fulfilment of the requirement for the degree of Master of Science. The

members of the Supervisory Committee were as follows:

Azman Hassan, PhD

Senior Lecturer

Faculty of Economics and Management

Universiti Putra Malaysia

(Chairman)

Zaiton Ali, PhD

Senior Lecturer

Faculty of Economics and Management

Universiti Putra Malaysia

(Member)

BUJANG BIN KIM HUAT, PhD

Professor and Dean

School of Graduate Studies

Universiti Putra Malaysia

Date:

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Declaration by graduate student

I hereby confirm that:

this thesis is my original work;

quotations, illustrations and citations have been duly referenced;

this thesis has not been submitted previously or concurrently for any other degree

at any other institutions;

intellectual property from the thesis and copyright of thesis are fully-owned by

Universiti Putra Malaysia, as according to the Universiti Putra Malaysia

(Research) Rules 2012;

written permission must be obtained from supervisor and the office of Deputy

Vice-Chancellor (Research and Innovation) before thesis is published (in the form

of written, printed or in electronic form) including books, journals, modules,

proceedings, popular writings, seminar papers, manuscripts, posters, reports,

lecture notes, learning modules or any other materials as stated in the Universiti

Putra Malaysia (Research) Rules 2012;

there is no plagiarism or data falsification/fabrication in the thesis, and scholarly

integrity is upheld as according to the Universiti Putra Malaysia (Graduate

Studies) Rules 2003 (Revision 2012-2013) and the Universiti Putra Malaysia

(Research) Rules 2012. The thesis has undergone plagiarism detection software.

Signature: ________________________ Date: __________________

Name and Matric No.: Nurul Afifah Ab Aziz, GS26898

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Declaration by Members of Supervisory Committee

This is to confirm that:

the research conducted and the writing of this thesis was under our supervision;

supervision responsibilities as stated in the Universiti Putra Malaysia (Graduate

Studies) Rules 2003 (Revision 2012-2013) are adhered to.

Signature:

Name of

Chairman of

Supervisory

Committee:

Dr. Azman Hassan

Signature:

Name of

Member of

Supervisory

Committee:

Dr. Zaiton Ali

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TABLE OF CONTENTS

Page

ABSTRACT i

ABSTRAK iii

ACKNOWLEDGEMENTS v

APPROVAL vi

DECLARATION viii

LIST OF TABLES xii

LIST OF FIGURES xiii

LIST OF ABBREVIATIONS xiv

CHAPTER

1 INTRODUCTION

1.1 Introduction 1

1.2 Background of the study 2

1.3 An overview of the Malaysian construction industry 4

1.4 Problem statement 6

1.5 Objective of the study 7

1.6 Significant of the study 7

1.7 Organization of the study 8

2 LITERATURE REVIEW

2.1 Introduction 9

2.2 Structure-Conduct and Performance paradigm approach 9

2.2.1 The Industry Structure 10

2.2.2 The Industry Performance 10

2.3 Market structure and Market concentration 10

2.4 The measurements of concentration 12

2.5 Relationship of the industry structure and performances 13

2.6 Malaysian construction industry 15

2.7 Summary 17

3 METHODOLOGY

3.1 Introduction 18

3.2 Measurements of the concentration method 18

3.2.1 Concentration Ratio 18

3.2.2 Herfindahl – Hirschman Index 19

3.2.3 Entropy Index 19

3.2.4 Hannah Kay Index 20

3.2.5 GINI Coefficient 20

3.3 The Structure-Conduct and Performance paradigm approach 21

3.4 Model specification 21

3.4.1 Variable measurement 22

3.5 Panel data estimation 22

3.5.1 Breuch-Pagan Test 23

3.5.2 Hausman Test 24

3.5.3 Diagnostic Test 24

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3.6 The data 24

3.7 Data selection 25

4 RESULTS AND DISCUSSION

4.1 Introduction 27

4.2 Trend of the concentration level in Malaysian Construction

Industry

27

4.3 Concentration Ratio 29

4.4 Herfindahl - Hirschman Index 30

4.5 Hanna Kay Index 31

4.6 Entropy Index 32

4.7 GINI Coefficient 33

4.8 Result of the regression analysis 35

4.9 Summary 38

5 SUMMARY AND CONCLUSION

5.1 Summary 39

5.2 Conclusion and policy implication 40

5.3 Limitation and recommendation 41

REFERENCES 42

BIODATA OF STUDENT 46

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LIST OF TABLES

Table Page

2.1 The Transformation of the Malaysian Construction Firm 17

4.1 Trends in Measurement of Concentration Level in Malaysian

Construction Industry 28

4.2 Descriptive Statistics 36

4.3 Regression Result 36

4.4 Diagnostic Check 37

4.5 Result of Robust Standard Error 38

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LIST OF FIGURES

Figure Page

1.1 Real GDP and Construction Sector Growth 3

1.2 Malaysian Construction Output, year 2000 until 2012 5

2.1 The Structure-Conduct Performance Paradigm Approach 9

2.2 Inter-relationship in the SCP Paradigm Approach 14

2.3 Number of Malaysian Construction Firms 16

3.1 Total Revenue of Total Construction Firms 26

4.1 Concentration Ratio 30

4.2 Herfindahl Hirschman Index 31

4.3 Hanna Kay Index 32

4.4 Entropy Index 33

4.5 Gini Coefficient 34

4.6 Lorenz Curve 35

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LIST OF ABBREVIATIONS

CR Concentration Ratio

BURSA Kuala Lumpur Stock Exchange Market

EI Entropy Index

GINI Gini Coefficient

GLS Generalized least square

HHI Herfindahl Herschman Index

HK Hanna and Kay Index

MS Market Share

MyCC Malaysia Competition Commission

OLS Ordinary least square

PCSE Panel-Corrected Standard Error

SCP Structure Conduct and Performance

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CHAPTER ONE

1 INTRODUCTION

1.1 Introduction

The Malaysian construction sector has close linkages to other sectors that exist in the

economy. Its development and performance has strong impact on the rapid

development and intensification of the growth of the other sectors. This is because

almost all of the outputs produced by the industry are primary output for structures and

buildings, such as houses, offices premises, roads, bridges and highways as well as for

its maintenance.

Besides the importance of the construction industry to the economy, the organization

and the performance of the firms within the industry is most important for the purpose

of its survival and profitability. In a microeconomic perspective a perfectly competitive

industry, firms or markets assumes that there are always many buyers and sellers which

deals with homogeneous products under the conditions of easy entry and exit together

with perfect knowledge (Ferguson and Ferguson, 1994; Martin, 1993; and Waldman

and Jensen, 2013). However, in the real world situation the set-up of firms or

industries, like the construction industry the major firm or industry structure normally

depart from the condition and characteristics of a perfectly competitive firm or

industry. Therefore, the structure could be in the form of monopoly (a single supplier),

oligopoly (few suppliers) or monopolistic competition (many suppliers but less than

those in perfectly competitive industry).

The concern over the construction industry is in the number of suppliers with the size

distribution of suppliers with one or a few very large firms and many smaller firms,

which will more likely perform like a monopoly rather than an industry with few firms

of about the same size (Eccles et al., 1999). Consequently, the characteristic of industry

structure will determine the conduct of the market, which is based on the firms’

decision. Such behaviour of the firm often reflects the performance of the industry

measured along the efficiency terms, through the assessment of firms’ profitability

level (Church and Ware, 2000).

Due to the importance of the construction industry to the economy, the other main

concern is about the performance, particularly the efficiency of the industry, whether

they are allocatively or productively efficient (Ferguson and Ferguson, 1994).

Normally the performance of the industry profitability is different between the perfect

and imperfect market based on its rate of return on profit. In a perfectly competitive

industry, firms are able to earn normal rate of return on their investment. However, a

monopoly profit (in an imperfectly competitive market) developed for the firm to earn

above normal rate of return (Martin, 2010). If such situation occurs in the industry, the

market power is exist.

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The essential element for a competitive market to exist is the optimal allocation of

resources. Of course the pattern of resource allocation under competitive market in the

real world is hard to measure. Therefore, the competition policy will serve as an

instrument to encourage industrial efficiency in order for the industry to be

competitive, at least in the home market.

1.2 Background of the Study

The construction sector is generally divided into four main subsectors, namely;

residential, non-residential, civil engineering and special trade works which refers to

maintenance activities which comprises the activities such as electrical, tiling,

plumbing, painting and carpentry. Most of this subsector has become the overall

formation of the national asset which basically involved with the other industry

activities. Hence, this has brought the development of construction industry towards

the primary concern in order to bring prosperity to national economy growth.

In the past few years the construction industry has gone through several ups and downs

of development growth. In early 2000, this industry has recorded an increase in the

growth of construction activities due to the government implementation of several

mega project which nowadays has become the most established building for the nation.

For instance; Kuala Lumpur International Airports, Sepang International Circuit and

the development of the Multimedia Super Corridor known as Putrajaya and Cyberjaya.

After the period of the commendable growth, the construction industry has trough the

reduction of growth. This was largely due to the impact from the Asian Financial Crisis

(Economic Reports, 2012/2013). However, in early year 2007, the construction

industry has positive growth and increased in the development of construction

activities. The government has responded to the crisis by implementing the stimulus

package during 9th

and 10th

Malaysia Plan.

The 10th

Malaysia Plan has started from the year 2011 until 2015. Consequently, in the

Malaysia plans’, the government intention is to improve the construction industry as

well as other sector as a whole (Economic Planning Unit, 2010). This was expected

from the Malaysia Plan’s to give high impact on the construction industry, where the

industry GDP is estimated to grow from 3.7% (in year 2011) per annum to 6% per

annum (in year 2012). Since the year 2001 until year 2010, the construction sector has

achieved sustainable growth which is shown in Figure 1. This figure shows that the

construction sector GDP contributions and the real (Malaysian) GDP. The figure shows

that the real GDP registered a negative growth of -1.7% in the year 2009 due to the

world economic crises (Economic Reports, 2012/2013).

However, in the same year the construction sector recorded a high contribution of 5.7%

towards the Malaysian GDP. This shows the significant effects from the government

effort in boosting construction sector in the 9th

Malaysia plan through the government

stimulus package (Economic Planning Unit, 2010). Thus, it brings the spur to the

construction sector in year 2010, with recorded 5.3% of the GDP. Such attempt by the

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government plan has improved the economic growth as shown by the rise in real GDP

from a negative growth in year 2009 to positive growth of 7.2% in year 2010.

However, a decline in construction growth in year 2011 is due to completion of major

construction activities.

Figure 1.1: Real GDP and Construction Sector Growth

(Sources: Malaysia economic report, various issues.)

The 10th

Malaysia Plan has started from the year 2011 until 2015. Consequently, in the

Malaysia plans’, the government intension is to improve the construction industry as

well as other sector as a whole (Economic Planning Unit, 2010). This was expected

from the Malaysia Plan’s to give high impact on the construction industry, where the

industry GDP is grew at 18.1% (in year 2012). Most of the high rise property was built

in the golden area. Increase in civil-engineering sub-sector was also one of the

contributions of the construction growth such as new oil and gas plant, Iskandar

Malaysia in Johor and new electric power plant (Economic Report, 2012/2013).

The 10th

Malaysia plan is also to have sustainable growth of the social and economic

betterment for the Malaysian society. For example, underlying the main agenda in the

development of the National Key Economic Areas (NKEA) is the building of the Mass

Rapid Transit (MRT) and the Economic Transformation Programs. Thus, this has

brought about the construction sector as one of the major role to play towards fulfilling

the objectives of the national economic infrastructure growth plan.

2.1 2.3 1.9

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1.3 An Overview of Malaysian Construction Industry

According to Wells (1985), in his study define the term of construction industry which

describes the activity of physical infrastructure and facilities. The physical

infrastructure is implementing the various construction activities, for instance,

residential, industrial building and public amenities. These activities are the effort in

order to improve the development in standard of living. Without the development of

the infrastructure, a country cannot grow further in order to spur the economic growth.

Since the construction industry plays an important role in the economic growth, the

process of development should be established. The establishment of this sector may

also extensively benefit the other industries as well.

Malaysian Construction industry can be described in two general categories, first

categories comprises of the residential construction, non-residential construction and

civil engineering construction. While the second categories comprise of special trade

construction, which involve activities such as metal works, electrical works, plumbing,

sewerage and sanitary work, refrigeration and air-conditioning work, painting work,

carpentry, tiling and flooring work, and glass work (Ibrahim et al., 2010).

Construction industry is an important sector in generating employment, national fixed

asset and more crucial in the nation development of socioeconomic, henceforth will

contribute to the national economic growth. Furthermore, this sector is considered the

key sector which other sector; such as manufacturing, agriculture, services and

tourism; depending on the construction industry to build their construction asset

(building, factory and road).

Malaysian construction industry plays a larger role in driving the economy towards

vision 2020. Figure 2 shows the construction output from year 2000 until 2012. The

construction output has increased from RM 6, 964 billion in 2000 to RM 26, 531

billion at the end of year 2012. The increasing trends of the construction output give an

illustration of a strong growth in the industry. Furthermore, when the economy down

turn, this industry showed a stable output growth and developed rapidly towards

economic growth (Abdullah et al., 2004).

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Figure 1.2: Malaysia Construction Output, year 2000 until 2012

(Sources: Malaysia economic report, various issues.)

Generally, the construction industry growth rate has a positive correlation with the

construction output and real GDP. A study by Chia, (2012), shows that there exist

causality between the growth in the construction sector and the growth in Gross

Domestic Product (GDP) from 1970 to 2009. As a result, growth of the construction

industry activities gives an impact towards changes in the growth of GDP.

The impact from the growth Malaysian construction industry to the Malaysia real GDP

has brought high demand for this industry in term of the development of national

economy and also to the growth of other sectors in the economy. However, several

issues has occurred in regarding the performance of construction industry such as delay

in construction activities phenomena, the reduction in the quality of the construction

building problems and the increase in material housing prices.

Issue of the construction material price has brought slightly increase towards the

soaring price of the industry output. In the Economic report (2008/2009), reported that

the construction material price is monitor under government authorities and the annual

price of construction output is controlled by the government board. However, in the

middle of year 2008, the government has liberalized the price of construction material,

where the price was determined by the market, through the demand and supply. Hence,

this adjustment has given greater impact of the construction output, particularly the

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residential building. Thus, this has brought the pressure to the industry in order to

improve and strengthened the industry performance.

In order to promote for the better industry performance, government has taken some

initiative in promoting towards the competitive market. The competitive market can be

achieved through the implementation of the new competition policy. Under the

Malaysian Competition Commission (MyCC), competition policy has been

implemented known as Competition Act 2010. With the competition policy practises, it

will protect the industry and bring the competitive environment, as well as protecting

the consumers.

1.4 Problem Statement

Recently, Malaysia has come out with new competition policy that has been gazetted in

the Competition Act 2010. The main objective of competition policy is to promote

economic competition and economic growth together with protecting the consumers.

The competition policy is an important instrument in promoting the efficiency of

Malaysian construction industry to be competitive in the market. Many empirical

studies found that the competitiveness of the industry is significant with the structure

of an industry, which can be determined by the degree of concentration. One may

assume that the Malaysian construction industry structure is either monopolistic or

oligopolistic, based on the industry characteristic which follows the structure of an

imperfect market. Nevertheless, such belief will have to be investigated in order to

understand the actual structure of the Malaysian construction industry.

When recognizing the structure, henceforth, the characteristics of the performance of

the industry can be identified. Such relationships; between structure and performance is

well explained by the Structure-Conduct and Performance paradigm approach. Few

studies have addressed parallel finding with regard to the structure of the construction

market of various sub-sectors1. It appears that the construction industry has a non-

competitive market structure which has brought inefficient performance of the

construction industry. Focussing on the Malaysian construction industry, there have

been lacks of analysis in relation to the study of the market structure and its

performance, which need to be empirically researched.

1 For instance, McCloughan (2004) in his study found oligopolies market structure in British construction

sector using 20 years data; that is between the year 1980 and 1999. Chiang et. al (2001) has estimated on the

number of contractor in Hong Kong construction industries, also found that oligopoly market structure in this industry, which recorded high concentration level in the civil engineering sector.

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Considering the phenomena in the Malaysian construction industry, over the issue of

construction material price has brought slightly increase towards the soaring price of

the industry output. Malaysia Economic Report (2008/ 2009) has reported that the

construction material price is monitor under market demand and supply. Hence, this

adjustment has given greater impact of the construction output, particularly the

residential building. Government effort to promote economic development by

promoting and protecting the process of competition from anti-competitive practices

has brought policy which could turn the industries to be more competitive.

Therefore, the features of the industry performance and the relationship with the

industry structure need to be examined; using the SCP paradigm approach. Hence,

what are the characteristic of the structure of the Malaysian construction industry?

Does the structure of the industry is significant to the industry performance? These

questions need to be answered in order to realize the development of a more

competitive market structure in line with the competition policy objectives.

1.5 Objectives of the Study

General objective

The general objective of this study is to investigate the market structure of the

Malaysian construction industry, which will determine the performance of the industry

using Structure-Conduct and Performance paradigm approach.

Specific objective

The specific objectives of the study are:

i. To investigate the market structure of the Malaysian construction industry.

ii. To determine the industry performance of the Malaysian construction

industry base on the Structure-Conduct and Performance paradigm

approach.

1.6 Significance of the study

The aim of this study is to understand the market structure of the Malaysian

construction industry. Normally, the type of industry structure will explain the

characteristic of the industry as a whole. Therefore, it is important to identify the

structure of the construction industry which will henceforth provide better

understanding of the industry performance.

The relationship of structure and performance is significant with the competition policy

when the existence of the industry structure which likely to have the practices of

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concentrated market to occur. Thus, the investigation of the true market performance in

the construction industry will encourage the industry to be efficient.

Unlike other study from the existing literature, this study emphasized the structure and

performance relationship based on the effort from the Malaysian’s government in

implementing the competition policy. The intension from the competition policy

implication is to encourage competitiveness and economic growth. With the

knowledge of the industry structure and market performance relationship, it will help

the authorities and government in emphasizing the policy implementation and

regulation needed.

1.7 Organization of the study

This study is divided into five chapters. The first chapter is the introduction of the

study which includes area of research problem statement, objective of the study,

significant of the study and how the organization of this study will be carried out. The

second chapter is literature review which discusses critical review of the literature in

relation to the study. An overview of the Malaysian construction is discussed in the last

section of chapter two.

Chapter three provides the discussion about methodology used, the data and the

analysis of the model chosen. The fourth chapter is discussed the analysis of the

estimation results, description of the variables. Finally, chapter five discussed the

conclusion of the study and policy implication which can be made.

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6 REFERENCES

Abdullah, M. R. B., & Abdul Jalil, S. (2006). Industrial structure and concentration in

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