This chapter studies entry dynamics in Portugal in the period 1982-86. The findings are that (i) entry and exit are deterred by economies of scale and product differentiation and (ii) sunk costs are only important to the displacement process in which less efficient firms are replaced by more efficient ones. Long-run industry structure appears to depend on the number of efficiently scaled plants that markets can accommodate, whereas the speed of convergence towards the long-run equilibrium depends on past profits and the degree of cost sunkness. Speed of convergence, long-run profits and market volatility are found to be correlated significantly.