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Is performance driven by industry‐ or firm‐specific factors? A reply to McNamara, Aime, and Vaaler
Author(s) -
Hawawini Gabriel,
Subramanian Venkat,
Verdin Paul
Publication year - 2005
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/smj.500
Subject(s) - outlier , identification (biology) , industrial organization , theory of the firm , econometrics , business , marketing , economics , microeconomics , statistics , mathematics , botany , biology
Abstract We revisit the questions of identification of outlying firms within industries and their impact on the relative importance of firm‐ and industry‐specific factors for firm performance. In response to McNamara, Aime and Valler (2005), we argue that the key results in Hawawini, Subramnian and Verdin (2003) are insensitive to the varying methods used to identify firm outliers. Further, we argue that conducting tests on industry outliers are inconsistent to what is indicated by theory and past empirical results on the relative importance of firm and industry effects to firm performance. Firm effects may matter most for outperforming and underpeforming firms, while industry effects may be at least as important to firms ‘stuck in the middle’. Copyright © 2005 John Wiley & Sons, Ltd.