With the nations of the world becoming more interdependent, it is imperative to take international influences into account in understanding the organization of industry within a country. This book extends the structure/conduct/performance framework of analysis to present a fully specified simultaneous equation model of an open economy—Canada.

By estimating a system of equations of all the major variables, the authors can identify which variables are dependent and which are independent. They are thus able to assess the relative importance of such factors as seller concentration, import competition, retailing structure, advertising expenditure, research and development spending, and technical and allocative efficiency in shaping the organization of industry in Canada. In addition, using both industry-level and firm-level data, the authors develop methods for assessing the effect of structural variables on diversification strategies and the consequences for market performance. They also study the effects of such variables on firms’ access to capital markets. The book concludes with a discussion of the implications of the findings for government policy.

Investment banks play a critically important role in channeling capital from investors to corporations. Not only do they float and distribute new corporate securities, they also assist companies in the private placement of securities, arrange mergers and acquisitions, devise specialized financing, and provide other corporate financial services.

After sketching the history and evolution of investment banking, the authors describe the structure of the industry, focusing on the competitive forces at work within it today. They explore patterns of concentration and analyze the strategic and economic factors that underlie those patterns. The authors directly examine the pairing up of investment banks with their corporate clients. They show that the market is sharply segmented, with banks and corporate clients being matched in roughly rank order, the most prestigious banks with the largest, most powerful clients, and so on. Vigorous competition occurs within each segment, but much less between them.

With the industry now confronting a changing regulatory environment, a growing tendency of clients to arrange their own financing, and increasing competition both from within and from commercial banks and foreign institutions, Competition in the Investment Banking Industry is essential reading for anyone interested in the future of investment banking.

Market signaling, a phrase formulated by A. Michael Spence, means the activities and characteristics of individuals which are visible to somebody else and convey information in a market, such as the job market. This study attempts to explain the informational content of market signals.

In many markets, people are screened. Employers screen job applicants. Banks screen loan applicants. In screening processes like these, the attributes of individuals, such as education, previous experience, personal appearance, sex, and race may be read as signals. Thus education may be a signal of an ability to do a certain kind of job. Spence finds that when education is regarded as a job-market signal there is a systematic tendency to overinvest in it.

The author also extends the concept of “market equilibrium” to include signaling. A signaling equilibrium, when applied to a job market, is defined as a situation in which employers’ beliefs about the relationship between (1) applicants’ signals and (2) their productivity are confirmed by their performance after they are hired. Spence uses this concept to derive insights into the efficiency of a market system for allocating jobs to people and people to jobs. His approach gives economists and policy makers a way of looking at the welfare properties of various signals and of studying the informational structures of particular markets.