Measuring Industry And Firm Effects In Food And Agribusiness Firms
AbstractManagers craft strategies that, if successfully implemented, can improve profitability and financial performance over time. Can firms repeat their performance over time? If so, then a manager who crafted a successful strategy could expect her/his firm to achieve greater profitability relative to other firms within its industry. The objective of this study was to compare business performance (accounting profitability) for publicly traded and cooperatively-owned food and agribusiness firms. We used the Standard and Poors Compustat database using the methodology of McGahan and Porter's paper which used on 4,112 manufacturing firms. Return on investment for each SIC code in each year was calculated. A regression equation with return on investment as the dependent variable and the average returns on the right hand side were used in a weighted least squares regression. The data was broken out into processing, wholesaling, restaurants, and retail supermarkets. Industry effects are greatest across all business segments and the processing sector. The retail supermarket sector has had relatively stable profits due to both industry and firm effects over time. This would suggest that the retail industry structure is conducive to stable profits and that firms within the industry are able to differentiate themselves, which also contributes to permanence of profits. Our results suggest that industry structure does not contribute to stable profits in the wholesale and restaurant sector. Industry effects are more persistent than corporate effects. These implications are also of interest to land grant universities. Agribusiness economics research and extension programs exist at many land grant universities to educate producers and management about producer-owned businesses. Finally, persistence of profitability in certain firms has long been noted by economists. Further research is needed on identifying characteristics of those firms that contribute to their persistent profits.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by International Food and Agribusiness Management Association (IAMA) in its journal International Food and Agribusiness Management Review.
Volume (Year): 05 (2003)
Issue (Month): 04 ()
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Caves, R E & Porter, M E, 1977. "From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition," The Quarterly Journal of Economics, MIT Press, vol. 91(2), pages 241-61, May.
- Boland, Michael A. & Amanor-Boadu, Vincent & Barton, David G., 2004. "Land O' Lakes," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 7(02).
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.