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What Causes Firm Profitability Variation in the EU Food Industry? A Redux of Classical Approaches of Variance Decomposition

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  • Stefan Hirsch
  • Jan Schiefer

Abstract

ABSTRACT Since the 1980s economic researchers have applied variance decomposition methods such as ANOVA or components‐of‐variance (COV) in order to determine the importance of different effects for firm profitability variation. Nevertheless, these studies either focus on entire manufacturing sectors or on the U.S. food sector. This article, therefore, aims to determine the sources of firm profitability variation for EU food processors using the classical approaches of hierarchical ANOVA and COV. The paper also highlights a lack of the hierarchical ANOVA effect introduction pattern that occurs throughout previous literature. The results suggest that firm‐related effects are the main profit driver while industry, year, and country effects are negligible. [EconLit citations: L10, L25, C33].

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  • Stefan Hirsch & Jan Schiefer, 2016. "What Causes Firm Profitability Variation in the EU Food Industry? A Redux of Classical Approaches of Variance Decomposition," Agribusiness, John Wiley & Sons, Ltd., vol. 32(1), pages 79-92, January.
    • Handle: RePEc:wly:agribz:v:32:y:2016:i:1:p:79-92
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    File URL: http://hdl.handle.net/10.1002/agr.21430
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    2. Maximilian Koppenberg & Stefan Hirsch, 2022. "Output market power and firm characteristics in dairy processing: Evidence from three EU countries," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 490-517, June.
    3. Adelina Gschwandtner & Stefan Hirsch, 2018. "What Drives Firm Profitability? A Comparison of the US and EU Food Processing Industry," Manchester School, University of Manchester, vol. 86(3), pages 390-416, June.
    4. Adrián Rabadán & Ángela González-Moreno & Francisco J. Sáez-Martínez, 2019. "Improving Firms’ Performance and Sustainability: The Case of Eco-Innovation in the Agri-Food Industry," Sustainability, MDPI, vol. 11(20), pages 1-16, October.
    5. Lanter, David & Hirsch, Stefan & Finger, Robert, 2018. "Profitability and Competition in EU Food Retailing," 2018 Annual Meeting, August 5-7, Washington, D.C. 274202, Agricultural and Applied Economics Association.
    6. Ivana Blazkova & Ondrej Dvoulety, 2018. "Sectoral And Firm-Level Determinants Of Profitability: A Multilevel Approach," International Journal of Entrepreneurial Knowledge, Center for International Scientific Research of VSO and VSPP, vol. 6(2), pages 32-44, December.
    7. Zouaghi, Ferdaous & Hirsch, Stefan & Garcia, Mercedes Sanchez, 2016. "What Drives Firm Profitability? A Multilevel Approach To The Spanish Agri-Food Sector," 56th Annual Conference, Bonn, Germany, September 28-30, 2016 244762, German Association of Agricultural Economists (GEWISOLA).
    8. Rachel A. Bahn & Gumataw K. Abebe, 2020. "Food retail expansion patterns in Sub‐Saharan Africa and the Middle East and North Africa: Institutional and regional perspectives," Agribusiness, John Wiley & Sons, Ltd., vol. 36(3), pages 453-481, June.

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