Review of Industrial Organization 21: 55–71, 2002.
© 2002 Kluwer Academic Publishers. Printed in the Netherlands.
How Much Do Strategic Groups Matter?
and JUAN VENTURA-VICTORIA
Dep. Admón. Empresas y Contabilidad, Facultad de Económicas, Universidad de Oviedo, Avda. del
Cristo s/n 33071 Oviedo, Spain
E-mails: eﬁdalgo@correo.uniovi.es; firstname.lastname@example.org
Abstract. Understanding ﬁrm heterogeneity is the ﬁrst step towards explaining the dispersion of
proﬁt rates between ﬁrms. This paper proposes a framework that distinguishes between three sources
of competitiveness, related to three levels of ﬁrm heterogeneity, which give rise to industry compet-
encies, strategy-speciﬁc competencies and ﬁrm-speciﬁc competencies. Using data from a Spanish
survey we estimate the relative importance of these three sources of heterogeneity. We show that
taking the group effect into account signiﬁcantly differentiates our results from those obtained in
previous research. We provide new evidence on the existence of a signiﬁcant group effect and also
an estimate of its relative importance vis à vis ﬁrm and industry effects.
Key words: Firm performance, strategic groups, variance components analysis.
Studying the sources of performance differences among ﬁrms is at the heart of
the ﬁelds of industrial organization and strategic management. Given that observed
performance differences would not arise under a perfect competition framework,
research has focused on market imperfections and interﬁrm heterogeneity. Two
main sources of competitiveness have been extensively analysed in the literature.
First, industry drivers generate systematic differences in the performance of ﬁrms
competing in different industries (Mason, 1939; Porter, 1980). Second, the ﬁrm
itself may have a competitive advantage or disadvantage with respect to other ﬁrms
in its industry (Barney, 1991; Peteraf, 1993).
The industrial organisation tradition emphasises industry structure as the main
determinant of ﬁrm performance. The resource-based view of the ﬁrm (Wernelfelt,
1984), on the other hand, emphasises ﬁrm heterogeneity, but fails to capture the im-
portance of the similarities between ﬁrms. Strategic group analysis provides a tool
to reconcile intraindustry heterogeneity with the internal homogeneity of group
member ﬁrms. Although some research has estimated the relative importance of
The authors are grateful to Jos
e M. Montes, Isabel Su
arez, and two anonymous
referees for their helpful comments on earlier drafts of this paper. Thanks are due to the Fundaci
ublica for providing access to the data used in this study and the Fundaci
on Banco Herrero
for ﬁnancial support. The usual disclaimer holds.