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The Convergence of Profits in the Long Run: Inter-firm and Inter-industry Comparisons

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Author Info
Cubbin, John
Geroski, Paul A

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Abstract

This paper considers the extent to which the short-run dynamic behavior and long-run equilibrium levels of profitability differ among firms within the same industry. Movements in profits are modeled in terms of firm specific deviations from average industry profits, and industry specific deviations from economy-wide average returns. Applied to a sample of 217 large U.K. firms, 1951-77, the results suggest that considerable heterogeneities exist within most industries. That is, most firms' profitability experience differs considerably from those of their closest rivals. Copyright 1987 by Blackwell Publishing Ltd.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Industrial Economics.

Volume (Year): 35 (1987)
Issue (Month): 4 (June)
Pages: 427-42
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Handle: RePEc:bla:jindec:v:35:y:1987:i:4:p:427-42

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  1. Dennis Mueller & Burkhard Raunig, 1999. "Heterogeneities within Industries and Structure-Performance Models," Review of Industrial Organization, Springer, vol. 15(4), pages 303-320, December. [Downloadable!] (restricted)
  2. Juan Carlos Bou & Albert Satorra, 2003. "The Persistence of Abnormal Returns at Industry and Firm Levels," Economics Working Papers 729, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  3. Oleg Badunenko & Michael Fritsch & Andreas Stephan, 2006. "What Determines the Technical Efficiency of a Firm? The Importance of Industry, Location, and Size," Jenaer Schriften zur Wirtschaftswissenschaft 33/2006, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  4. Michael Fritsch & Andreas Stephan, 2004. "The Distribution and Heterogeneity of Technical Efficiency within Industries: An Empirical Assessment," Discussion Papers of DIW Berlin 453, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  5. J. Kapler, 2000. "Measuring the Economic Rate of Return on Assets," Review of Industrial Organization, Springer, vol. 17(4), pages 457-463, December. [Downloadable!] (restricted)
  6. Peter W Roberts, 2001. "Innovation and firm-level persistent profitability: a Schumpeterian framework," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(4-5), pages 239-250. [Downloadable!]
  7. Jack Glen & Kevin Lee & Ajit Singh, 2002. "Corporate profitability and the dynamics of competition in emerging markets: a time series analysis," ESRC Centre for Business Research - Working Papers wp248, ESRC Centre for Business Research. [Downloadable!]
    Other versions:
  8. Dennis Mueller & Burkhard Raunig, 1998. "Heterogeneities within Industries and Structure-Performance Models," Working Papers 36, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
  9. Michael Fritsch & Andreas Stephan, 2004. "What Causes Cross-Industry Differences of Technical Efficiency?: An Empirical Investigation," Discussion Papers of DIW Berlin 457, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  10. Bentzen, Jan & Madsen, Erik Strøjer & Smith, Valdemar & Dilling-Hansen, Mogens, 2004. "Persistence in Corporate Performance? - Empirical Evidence from Panel Unit Root Tests," Working Papers 04-15, University of Aarhus, Aarhus School of Business, Department of Economics. [Downloadable!]
    Other versions:
  11. Glen, J. & Lee, K. & Singh. A., 2000. "Competition, Corporate Governance and Financing of corporate Growth in Emerging Markets," Accounting and Finance Discussion Papers 00-af46, Faculty of Economics, University of Cambridge. [Downloadable!]
  12. P. Geroski, 1998. "An Applied Econometrician's View of Large Company Performance," Review of Industrial Organization, Springer, vol. 13(3), pages 271-294, June. [Downloadable!] (restricted)
    Other versions:
  13. Schmalensee, Richard L., 1987. "Empirical studies of rivalrous behavior," Working papers 1990-87., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  14. Natália Barbosa & Helen Louri, 2003. "Corporate performance: does ownership matter? A comparison of foreign - and domestic - owned firms in Greece and Portugal," Working Papers 26, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho. [Downloadable!]
    Other versions:
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