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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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    Web page: http://mitpress.mit.edu/journals/

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    Cited by:
    1. 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.
    2. David S. Kaplan & Brooks Pierce, 2005. "Firmwide Versus Establishment-Specific Labor Market Practices," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 569-578, August.
    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. Andrew Benito, 2001. "'Oscillate Wildly': asymmetries and persistence in company-level profitability," Bank of England working papers 128, Bank of England.
    5. 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.
    6. 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.

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