Market competition is derived from the network effect on profit margins of buying and selling between suppliers and customers-the effective level of competition in an industry. For example, the largest real estate firms account for only a small proportion of all U.S. real estate transactions. Market concentration is close to zero. To obtain high profits observed in real estate, producers must be coordinated in ways not apparent from concentration. In fact, real estate markets are locally organized by interpersonal referrals and dominant local brokerages, with city and state regulations playing an important role in who gets to sell what.
Business services are another example.
Personal ties with clients are critical to success, and such ties are invisible. The strength of an organization's culture can and does affect a company's bottom line. A strong corporate culture stabilizes performance. When a company's stock varies with the market on a daily basis, increasing as the market increases and decreasing as the market decreases, then performance is stable. Setting aside textiles and the communications industry, Burt's research shows that performance is more erratic for strong-culture firms in industries like pharmaceuticals, retail and personal care, where market competition is less intense.