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On corporate structure, strategy, and performance: a study with directed acyclic graphs and PC algorithm

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Author Info

  • Hogun Chong

    (Management Department, Korea Rural Economic Institute, Seoul, Korea)

  • Mary Zey

    (Department of Management Science and Statistics, University of Texas at San Antonio, TX, USA)

  • David A. Bessler

    (Department of Agricultural Economics, Texas A&M University, College Station, TX, USA)

Abstract

This paper reconsiders empirical evidence on relationships among variables related to corporate strategy, structure, and performance. Causal relationships among variables are modeled as directed acyclic graphs using PC-algorithm. Return on Assets appears to be determined by Advertising Intensity, Unrelated Diversification, R&D Intensity, and Organizational Ownership Hierarchy. Debt Structure and Investor Characteristics do not cause (either directly or indirectly) return on assets. These latter two variables appear to be effects of return on assets, not causes. Results offer mixed support of the theory that structure causes strategy, which in turn causes performance. Copyright © 2009 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1475
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 31 (2010)
Issue (Month): 1 ()
Pages: 47-62

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Handle: RePEc:wly:mgtdec:v:31:y:2010:i:1:p:47-62

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Bryant, Henry L. & Bessler, David A. & Haigh, Michael S., 2006. "Disproving Causal Relationships Using Observational Data," 2006 Annual meeting, July 23-26, Long Beach, CA 21166, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Kevin Hoover & Selva Demiralp, 2003. "Searching for the Causal Structure of a Vector Autoregression," Working Papers 33, University of California, Davis, Department of Economics.
  3. Porter, Michael E, 1979. "The Structure within Industries and Companies' Performance," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 214-27, May.
  4. Selva Demiralp & Kevin D. Hoover & Stephen J. Perez, 2008. "A Bootstrap Method for Identifying and Evaluating a Structural Vector Autoregression," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(4), pages 509-533, 08.
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  7. Shepherd, William G, 1972. "The Elements of Market Structure," The Review of Economics and Statistics, MIT Press, vol. 54(1), pages 25-37, February.
  8. Jian Yang & Hui Guo & Zijun Wang, 2004. "International transmission of inflation among G-7 countries: a data-determined VAR analysis," Working Papers 2004-028, Federal Reserve Bank of St. Louis.
  9. Bessler, David A. & Yang, Jian, 2003. "The structure of interdependence in international stock markets," Journal of International Money and Finance, Elsevier, vol. 22(2), pages 261-287, April.
  10. Steffen L. Lauritzen & Thomas S. Richardson, 2002. "Chain graph models and their causal interpretations," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 64(3), pages 321-348.
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  12. Jacquemin, Alexis P & Berry, Charles H, 1979. "Entropy Measure of Diversification and Corporate Growth," Journal of Industrial Economics, Wiley Blackwell, vol. 27(4), pages 359-69, June.
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