Business strategy, market structure and risk-return relationships: A structural approach
Article first published online: 8 NOV 2006
Copyright © 1989 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 10, Issue 6, pages 507–522, November/December 1989
How to Cite
Cool, K., Dierickx, I. and Jemison, D. (1989), Business strategy, market structure and risk-return relationships: A structural approach. Strat. Mgmt. J., 10: 507–522. doi: 10.1002/smj.4250100602
- Issue published online: 8 NOV 2006
- Article first published online: 8 NOV 2006
- Manuscript Revised: 23 JAN 1989
- Manuscript Received: 2 FEB 1988
A structural model is proposed which integrates and extends previous findings on the interrelations between risk—return outcomes, market share, firm conduct attributes, and inter-firm rivalry. It is argued that the relative impact of market share and firm conduct attributes on risk—return outcomes depends on the intensity of rivalry. The empirical setting is commerical banking in Indiana (1975–79). Latent variable path analysis (partial least-squares) is used to estimate the model. The effect of market share is found to be quite important, even when possible ‘spurious’ effects due to differences in individual firm attributes are controlled for. Given consistent indications of oligopolistic coordination found in various parts of the model, it is inferred that the measured effect of market share reflects the exercise of market power.