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Firm versus Sector Effects on Profitability and Growth: The Importance of Size and Interaction

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  • Vicky Bamiatzi
  • Graham Hall

Abstract

In this study we contribute to the long-standing debate on the impact of firm versus industry effects on firm performance in three distinct ways; firstly by testing the firm, industry and their interaction effects on performance, secondly by examining the impact of each effect for different size groups, and lastly by measuring performance in terms of sales growth in addition to profitability. We use data of 71,750 UK firms, between 2002 and 2004, and employ moderated regression analysis for three sub-samples namely micro, SMEs and large firms. With regards to profitability, we find the interaction effect to be significant in all sub-samples for broad level of industrial aggregation (SIC4). For narrow industrial aggregation (SIC2), the interaction effect is only significant for micro firms. Neither of the above effects is significant for sales growth.

Suggested Citation

  • Vicky Bamiatzi & Graham Hall, 2009. "Firm versus Sector Effects on Profitability and Growth: The Importance of Size and Interaction," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 16(2), pages 205-220.
    • Handle: RePEc:taf:ijecbs:v:16:y:2009:i:2:p:205-220
    DOI: 10.1080/13571510902917517
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    Cited by:

    1. Frederik Banning & Jessica Reale & Michael Roos, 2023. "The Complexity of Corporate Culture as a Potential Source of Firm Profit Differentials," Papers 2305.14029, arXiv.org, revised Nov 2023.
    2. Vicente López-López & Susana Iglesias-Antelo & Esteban Fernández, 2020. "Is Sustainable Performance Explained by Firm Effect in Small Business?," Sustainability, MDPI, vol. 12(23), pages 1-13, December.
    3. Bamiatzi, Vassiliki & Cavusgil, Salih Tamer & Jabbour, Liza & Sinkovics, Rudolf R., 2014. "Does business group affiliation help firms achieve superior performance during industrial downturns? An empirical examination," International Business Review, Elsevier, vol. 23(1), pages 195-211.
    4. Sofia Fonseca & Maria João Guedes & Vítor Conceição Gonçalves, 2022. "Profitability and size of newly established firms," International Entrepreneurship and Management Journal, Springer, vol. 18(2), pages 957-974, June.

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