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

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  • Cubbin, John
  • Geroski, Paul A

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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Bibliographic Info

Article provided by Wiley Blackwell 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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Cited by:
  1. Diagne, Youssoupha S & Sène, Serigne Moustapha, 2009. "La profitabilité des secteurs de l’économie sénégalaise
    [Profitability of economic sectors in Senegal]
    ," MPRA Paper 54921, University Library of Munich, Germany.
  2. Geroski, Paul A, 1998. "An Applied Econometrician's View of Large Company Performance," CEPR Discussion Papers 1862, C.E.P.R. Discussion Papers.
  3. Fritsch, Michael & Stephan, Andreas, 2004. "What causes cross-industry differences of technical efficiency? An empirical investigation," Freiberg Working Papers 2004,13, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  4. Jan Bentzen & Erik Madsen & Valdemar Smith & Mogens Dilling-Hansen, 2005. "Persistence in Corporate Performance? Empirical Evidence from Panel Unit Root Tests," Empirica, Springer, vol. 32(2), pages 217-230, 06.
  5. 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.
  6. Schmalensee, Richard L., 1987. "Empirical studies of rivalrous behavior," Working papers 1990-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  7. 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.
  8. 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.
  9. Glen, Jack & Lee, Kevin & Singh, Ajit, 2000. "Competition, corporate governance and financing of corporate growth in emerging markets," MPRA Paper 53625, University Library of Munich, Germany.
  10. Elango, B. & Sambharya, Rakesh B., 2004. "The influence of industry structure on the entry mode choice of overseas entrants in manufacturing industries," Journal of International Management, Elsevier, vol. 10(1), pages 107-124.
  11. J. Kapler, 2000. "Measuring the Economic Rate of Return on Assets," Review of Industrial Organization, Springer, vol. 17(4), pages 457-463, December.
  12. Altomonte, Carlo & Nicolini, Marcella, 2012. "Economic integration and the dynamics of firms’ competitive behavior," Structural Change and Economic Dynamics, Elsevier, vol. 23(4), pages 383-402.
  13. Andreas Georgiadis & Christos N. Pitelis, 2010. "The interrelationship between HR, strategy and profitability in service SMEs: empirical evidence from the UK tourism hospitality and leisure sector," LSE Research Online Documents on Economics 28722, London School of Economics and Political Science, LSE Library.
  14. 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.
  15. Dennis Mueller & Burkhard Raunig, 1998. "Heterogeneities within industries and structure-performance models," Working Papers 36, Oesterreichische Nationalbank (Austrian Central Bank).
  16. 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.
  17. Amato, Louis H. & Wilder, Ronald P., 2004. "Global competition and global markets: some empirical results," International Business Review, Elsevier, vol. 13(3), pages 401-416, June.

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