| Summary: | This paper investigates the intra-industry effects resulting from the birth of
a new restaurant at Portugal. Using event-study methods, this paper finds
that, in the year the new competitors open for business, industry rivals
experience an average abnormal loss of -17.6% in their return-on-assets,
which is due to a significant decrease in their profit margin, and asset
turnover ratio. Regression analysis further shows that high industry
concentration, low labor productivity, and low asset profitability magnify
the rivals’ underperformance, which is particularly acute when the
restaurants are located at Lisbon and Oporto, the two most heavily
populated Portuguese cities. Overall, this paper contributes to the
literature studying the economics of the eating-places industry, and has
important implications for both practice, and public policy
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