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HOW MUCH DOES INDUSTRY MATTER, REALLY?
Author(s) -
McGAHAN ANITA M.,
PORTER MICHAEL E.
Publication year - 1997
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/(sici)1097-0266(199707)18:1+<15::aid-smj916>3.0.co;2-1
Subject(s) - business , industrial organization , marketing , economics
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. © 1997 by John Wiley & Sons, Ltd.