How much does industry matter?

How much does industry matter? This study partitions the total variance in rate of return among FTC Line of Business reporting units into industry factors (whatever their nature), time factors, factors associated with the corporate parent, and business‐specific factors. Whereas Schmalensee (1985) reported that industry factors were the strongest, corporate and market share effects being extremely weak, this study distinguishes between stable and fluctuating effects and reaches markedly different conclusions. The data reveal negligible corporate effects, small stable industry effects, and very large stable business‐unit effects. These results imply that the most important sources of economic rents are business‐specific; industry membership is a much less important source and corporate parentage is quite unimportant. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Strategic Management Journal Wiley

How much does industry matter?

Strategic Management Journal, Volume 12 (3) – Mar 1, 1991

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Publisher
Wiley
Copyright
Copyright © 1991 John Wiley & Sons, Ltd.
ISSN
0143-2095
eISSN
1097-0266
D.O.I.
10.1002/smj.4250120302
Publisher site
See Article on Publisher Site

Abstract

This study partitions the total variance in rate of return among FTC Line of Business reporting units into industry factors (whatever their nature), time factors, factors associated with the corporate parent, and business‐specific factors. Whereas Schmalensee (1985) reported that industry factors were the strongest, corporate and market share effects being extremely weak, this study distinguishes between stable and fluctuating effects and reaches markedly different conclusions. The data reveal negligible corporate effects, small stable industry effects, and very large stable business‐unit effects. These results imply that the most important sources of economic rents are business‐specific; industry membership is a much less important source and corporate parentage is quite unimportant.

Journal

Strategic Management JournalWiley

Published: Mar 1, 1991

References

  • Determinants of firm performance: The relative importance of economic and organizational factors
    Hansen, Hansen; Wernerfelt, Wernerfelt
  • Strategic groups: Theory, research and taxonomy
    McGee, McGee; Thomas, Thomas

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