HOW MUCH DOES INDUSTRY MATTER, REALLY?
Article first published online: 4 DEC 1998
Copyright © 1997 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 18, Issue S1, pages 15–30, July 1997
How to Cite
McGAHAN, A. M. and PORTER, M. E. (1997), HOW MUCH DOES INDUSTRY MATTER, REALLY?. Strat. Mgmt. J., 18: 15–30. doi: 10.1002/(SICI)1097-0266(199707)18:1+<15::AID-SMJ916>3.0.CO;2-1
- Issue published online: 4 DEC 1998
- Article first published online: 4 DEC 1998
- Cited By
- profit components;
- firm performance;
- industry effects
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.