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- Title
HOW MUCH DOES INDUSTRY MATTER, REALLY?
- Authors
McGahan, Anita M.; Porter, Michael E.
- Abstract
In this paper, we examine the importance of year, industry, corporate-parent, and business-specific effects on the profitability of U.S. public corporations within specific 4-digit SIC categories. Our results indicate that year, industry, corporate-parent, and business-specific effects account for 2 percent, 19 percent, 4 percent, and 32 percent, respectively, of the aggregate variance in profitability. We also find that the importance of the effects differs substantially across broad economic sectors. Industry effects account for a smaller portion of profit variance in manufacturing but a larger portion in lodging/entertainment, services, wholesale/retail trade, and transportation. Across all sectors we find a negative covariance between corporate-parent and industry effects. A detailed analysis suggests that industry, corporate-parent, and business-specific effects are related in complex ways.
- Subjects
UNITED States; CORPORATIONS; PROFITABILITY; STRATEGIC planning; FINANCIAL performance; MANAGEMENT science; INDUSTRY classification; PARENT companies; FINANCIAL management
- Publication
Strategic Management Journal (John Wiley & Sons, Inc.) - 1980 to 2009, 1997, Vol 18, p15
- ISSN
0143-2095
- Publication type
Article
- DOI
10.1002/(sici)1097-0266(199707)18:1+<15::aid-smj916>3.3.co;2-t