This paper examines how industry concentration evolves through changes in corporate ownership, with a focus on private equity. Drawing on ownership and financial data for over five million public and private firms in the United Kingdom from 2002 to 2021, we examine how ownership types reshape industry structure. We introduce a decomposition of the Herfindahl Index that separates ownership-driven consolidation from reallocation driven by firm growth and entry, and apply it separately to private equity-owned, listed, and non-listed firms. Ownership-driven consolidation is pervasive and mechanically increases concentration, while growth-driven reallocation typically reduces it, resulting in modest net changes. Private equity-owned and listed firms contribute similarly to consolidation, whereas non-listed firms act as a countervailing force through relative growth. Consolidation is more prevalent in markets experiencing declining markups, indicating that ownership reallocation often occurs under increasing competitive pressure. Reflecting this selection, consolidation is associated with lower industry-level markups, while firm-level markups do not increase systematically, suggesting that concentration changes primarily operate through reallocation and productivity rather than higher prices.
Dyaran Bansraj, Erasmus School of Economics
Per Strömberg, Stockholm School of Economics
