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The Persistence of Shocks to Profitability

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  • Anita M. McGahan
  • Michael E. Porter
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    Abstract

    In this study, we use data for 1981 through 1994 on a large sample of U.S. companies to examine the persistence of incremental industry, corporate-parent, and business-specific effects on profitability. Our results indicate that the incremental effects of industry on profitability persist longer than the incremental effects of the corporate parent and of the specific business. Changes in industry structure have a more persistent impact on profitability than do changes in firm structure. © 1999 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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    Bibliographic Info

    Article provided by MIT Press in its journal The Review of Economics and Statistics.

    Volume (Year): 81 (1999)
    Issue (Month): 1 (February)
    Pages: 143-153

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    Handle: RePEc:tpr:restat:v:81:y:1999:i:1:p:143-153

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    Cited by:
    1. Juan Carlos Bou & Albert Satorra, 2014. "Univariate versus multivariate modeling of panel data," Economics Working Papers 1417, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Tarziján, Jorge & Brahm, Francisco & Daiber, Luis Felipe, 2008. "Entrepreneurial profitability and persistence: Chile versus the U.S.A," Journal of Business Research, Elsevier, vol. 61(6), pages 599-608, June.
    3. Baggs, Jennifer, 2004. "Changing Trade Barriers and Canadian Firms: Survival and Exit After the Canada-U.S. Free Trade Agreement," Analytical Studies Branch Research Paper Series 2004205e, Statistics Canada, Analytical Studies Branch.
    4. David S. Kaplan & Brooks Pierce, 2001. "Firm-Wide Versus Establishment-Specific Labor-Market Practices," Working Papers 0105, Centro de Investigacion Economica, ITAM.
    5. Adelina Gschwandtner & Michael Hauser, 2013. "Profit Persistence and Stock Returns," Studies in Economics 1320, Department of Economics, University of Kent.
    6. Andrew Benito, 2001. "'Oscillate Wildly': asymmetries and persistence in company-level profitability," Bank of England working papers 128, Bank of England.
    7. Ketelhöhn, Niels W. & Quintanilla, Carlos, 2012. "Country effects on profitability: A multilevel approach using a sample of Central American firms," Journal of Business Research, Elsevier, vol. 65(12), pages 1767-1772.
    8. Fukui, Yoshitaka & Ushijima, Tatsuo, 2011. "What drives the profitability of Japanese multi-business corporations? A variance components analysis," Journal of the Japanese and International Economies, Elsevier, vol. 25(2), pages 1-11, June.
    9. Iain Cockburn & Rebecca Henderson & Scott Stern, 1999. "The Diffusion of Science-Driven Drug Discovery: Organizational Change in Pharmaceutical Research," NBER Working Papers 7359, National Bureau of Economic Research, Inc.

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