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The sources of heterogeneity in firm performance: lessons from Italy1

Author

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  • Fabio Landini
  • Alessandro Arrighetti
  • Eleonora Bartoloni

Abstract

An extensive body of literature documents large and persistent within-industry heterogeneity of firm performance. While some authors explain such evidence in terms of input misallocation, we provide an alternative analytical framework that integrates insights from resource-based and institutional approaches. We interpret firms’ behaviour as the result of the interaction among exogenous and endogenous factors. Exogenous factors, both supply and demand related, define the opportunity set that is available to firms. Endogenous factors reflect instead firm-specific interpretations of such set, which, combined with the available resources and capabilities, determine a firm’s strategic responses, which can be markedly heterogeneous. Whenever the diversity of firm conducts is associated with relatively small profit differentials, firm heterogeneity can persist. Evidence based on the evolution of labour productivity and profit dispersion in the Italian manufacturing sector between the 1990s and early 2000s provides support for our interpretative framework.

Suggested Citation

  • Fabio Landini & Alessandro Arrighetti & Eleonora Bartoloni, 2020. "The sources of heterogeneity in firm performance: lessons from Italy1," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 44(3), pages 527-558.
    • Handle: RePEc:oup:cambje:v:44:y:2020:i:3:p:527-558.
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    File URL: http://hdl.handle.net/10.1093/cje/beaa001
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    Citations

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    Cited by:

    1. A. Cetrulo & A. Sbardella & M. E. Virgillito, 2023. "Vanishing social classes? Facts and figures of the Italian labour market," Journal of Evolutionary Economics, Springer, vol. 33(1), pages 97-148, January.
    2. Luca Cattani & Stefano Dughera & Fabio Landini, 2023. "Interlocking complementarities between job design and labour contracts," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(2), pages 501-528, July.
    3. Eleonora Bartoloni & Alessandro Arrighetti & Fabio Landini, 2021. "Recession and firm survival: is selection based on cleansing or skill accumulation?," Small Business Economics, Springer, vol. 57(4), pages 1893-1914, December.
    4. Francesco Bloise & Irene Brunetti & Valeria Cirillo, 2022. "Firm strategies and distributional dynamics: labour share in Italian medium-large firms," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(2), pages 623-655, July.
    5. Alessandro Arrighetti & Fabio Landini & Andrea Lasagni, 2021. "Swimming upstream throughout the turmoil: Evidence on firm growth during the great recession," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(3), pages 322-344, July.
    6. Christian Stetter & Philipp Mennig & Johannes Sauer, 2022. "Using Machine Learning to Identify Heterogeneous Impacts of Agri-Environment Schemes in the EU: A Case Study [The impact of agri-environmental schemes on farm performance in five EU member States: ," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 49(4), pages 723-759.
    7. Pollio, Chiara & Landini, Fabio & Prodi, Elena & Arrighetti, Alessandro, 2023. "Does Temporary Employment undermine the Quality of Permanent Jobs?," GLO Discussion Paper Series 1273, Global Labor Organization (GLO).
    8. Alessandro Arrighetti & Fabio Landini & Giorgia Sorrentino, 2020. "La ripresa passa dalla cogestione della filiera," QUADERNI DI ECONOMIA DEL LAVORO, FrancoAngeli Editore, vol. 2020(111), pages 225-235.

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