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The Persistence of Profits, Sectoral Heterogeneity and Firms' Characteristics

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  • Eleonora Bartoloni
  • Maurizio Baussola

Abstract

The analysis of the persistence of profits has long been a controversial issue within empirical industrial organisation literature. The aim of our paper is to provide new empirical findings that may account for patterns of both sectoral and firm profit persistence. The distinctive feature of our study is that we analyse a number of firms' ergodic distribution in each sector according to their profit level; we then calculate the difference between such a distribution and that prevailing in manufacturing as a whole. Finally, we break down this distribution; the resulting breakdown highlights the impact of each transition probability on inter-sectoral differences clearly, and it also emphasises the role of intra-sectoral dynamics in determining different persistence patterns. We then apply this methodology to both innovating and non-innovating firms, and conclude that among surviving firms innovation is indeed crucial to the persistence of profits. In addition, we set up an econometric test which enables us to estimate the impact of firm and sectoral characteristics on a firm's profit condition.

Suggested Citation

  • Eleonora Bartoloni & Maurizio Baussola, 2009. "The Persistence of Profits, Sectoral Heterogeneity and Firms' Characteristics," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 16(1), pages 87-111.
    • Handle: RePEc:taf:ijecbs:v:16:y:2009:i:1:p:87-111
    DOI: 10.1080/13571510802638973
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    References listed on IDEAS

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    1. Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 13-72.
    2. Adelina Gschwandtner, 2004. "Evolution of Profit Persistence in the US: Evidence from four 20-years periods," Vienna Economics Papers 0410, University of Vienna, Department of Economics.
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    Cited by:

    1. L. Crosato & P. Ganugi, 2007. "Statistical regularity of firm size distribution: the Pareto IV and truncated Yule for Italian SCI manufacturing," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 16(1), pages 85-115, June.
    2. Dinesh Jaisinghani & Mahesh Joshi & Jatin Goyal & Sharad Sharma, 2023. "Persistence of financial efficiency in indian hospitality and tourism industry: a dynamic panel Approach," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(2), pages 1845-1863, April.
    3. Zeren, Feyyaz & Öztürk, Erkan, 2015. "Testing For Profit Persistence Of Listed Manufacturing Companies In Istanbul Stock Exchange," Ekonomika, Journal for Economic Theory and Practice and Social Issues, Society of Economists Ekonomika, Nis, Serbia, vol. 61(2), pages 1-10, June.
    4. Elena Cefis & Stephanie Rosenkranz & Utz Weitzel, 2009. "Effects of coordinated strategies on product and process R&D," Journal of Economics, Springer, vol. 96(3), pages 193-222, April.
    5. John Cable & Adelina Gschwandtner, 2008. "On Modelling the Persistence of Profits in the Long Run: A Test of the Standard Model for 156 US Companies, 1950-99," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(2), pages 245-263.
    6. Eleonora Bartoloni & Maurizio Baussola, 2018. "Driving business performance: innovation complementarities and persistence patterns," Industry and Innovation, Taylor & Francis Journals, vol. 25(5), pages 505-525, May.
    7. Eleonora Bartoloni & Maurizio Baussola, 2015. "Persistent Product Innovation and Market-oriented Behaviour: the Impact on Firms' Performance," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1505, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    8. Mauricio Oyarzo & Gianni Romani & Miguel Atienza & Marcelo Lufin, 2015. "Spatio-temporal persistence of municipal rates of business start-ups in Chile," Documentos de Trabajo en Economia y Ciencia Regional 61, Universidad Catolica del Norte, Chile, Department of Economics, revised Jul 2015.
    9. Liu, Jia & Lister, Roger & Pang, Dong, 2013. "Corporate evolution following initial public offerings in China: A life-course approach," International Review of Financial Analysis, Elsevier, vol. 27(C), pages 1-20.

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