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Industry cluster and performance sensitivity

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  • Michaël Dewally
  • Yingying Shao

Abstract

Firms strategically achieve competitiveness through either operational efficiency or superior asset utilization, thereby impacting their responsiveness to innovations in profit margin or in asset turnover. We show that firms specializing in operating efficiency react more positively to shocks in profit margin than firms specializing in asset utilization. Firms may also decide to co-locate in an industry cluster, hoping to capture the positive externalities of input sharing, labor pooling and knowledge spill-over. We show that co-located firms are in a better position to benefit from innovations in asset turnover as they benefit from input sharing and labor pooling. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Michaël Dewally & Yingying Shao, 2015. "Industry cluster and performance sensitivity," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(4), pages 824-844, October.
    • Handle: RePEc:spr:jecfin:v:39:y:2015:i:4:p:824-844
    DOI: 10.1007/s12197-014-9288-0
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    More about this item

    Keywords

    Industry cluster; Performance; Strategic management; Marginal rate of substitution; G30; G31;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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