The market share‐profitability relationship: An empirical assessment of major assertions and contradictions

The market share‐profitability relationship: An empirical assessment of major assertions and... While previous research on the relationship between market share (MS) and business profitability (BP) has found a positive relationship, its nature (i.e. direct versus spurious), its context‐specificity, and the validity of MS as a predictor of BP have not been adequately addressed. Employing path analysis, this study examined the nature of this relationship across a taxonomy of homogeneous environments. The major findings were that (1) the association between MS and BP is context‐specific; (2) both direct and spurious relationships exist, and their relative strengths vary across environments; and (3) the validity of MS as a predictor of BP is context‐specific. Further, key firm conduct variables accounting for the spuriousness have been identified. Finally, implications of these findings for managers pursuing market share as a goal are discussed. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Strategic Management Journal Wiley

The market share‐profitability relationship: An empirical assessment of major assertions and contradictions

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Publisher
Wiley
Copyright
Copyright © 1986 John Wiley & Sons, Ltd.
ISSN
0143-2095
eISSN
1097-0266
DOI
10.1002/smj.4250070407
Publisher site
See Article on Publisher Site

Abstract

While previous research on the relationship between market share (MS) and business profitability (BP) has found a positive relationship, its nature (i.e. direct versus spurious), its context‐specificity, and the validity of MS as a predictor of BP have not been adequately addressed. Employing path analysis, this study examined the nature of this relationship across a taxonomy of homogeneous environments. The major findings were that (1) the association between MS and BP is context‐specific; (2) both direct and spurious relationships exist, and their relative strengths vary across environments; and (3) the validity of MS as a predictor of BP is context‐specific. Further, key firm conduct variables accounting for the spuriousness have been identified. Finally, implications of these findings for managers pursuing market share as a goal are discussed.

Journal

Strategic Management JournalWiley

Published: Jul 1, 1986

References

  • Toward a new contingency approach: the search for organizational gestalts
    Miller, Miller
  • Strategies of effective low share businesses
    Woo, Woo; Cooper, Cooper

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