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Analyzing Firm Performance Heterogeneity: The Relative Effect Of Business Definition

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  • N. HOUTHOOFD
  • S. DESMIDT
  • G. FIDALGO

Abstract

An ongoing discussion in strategic management concerns the relative impact of specific strategic decisions on firm performance. In this tradition, this research analyzes the relative impact of business domain choices on firm performance. More specific, the paper at hand (a) discusses a method to assess the relative impact of firm and business definition effects on firm performance within a specific industry, and (b) demonstrates the value of this method by measuring the effect of business definition on performance within the context of a specific SME-dominated industry, namely the Belgian electrical whole sale sector. The results indicate that firm effects explain most of the variance in four performance variables but that the impact of business definition on performance could be underestimated. It turns out, according to our findings, that business membership (and thus differences in business definition) explains about 8 percent of the variance in performance between firms within the examined industry. Consequently, managers should carefully monitor and examine the business domain they are in as it directly related with the firm’s level of performance.

Suggested Citation

  • N. Houthoofd & S. Desmidt & G. Fidalgo, 2009. "Analyzing Firm Performance Heterogeneity: The Relative Effect Of Business Definition," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/580, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:09/580
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    File URL: http://wps-feb.ugent.be/Papers/wp_09_580.pdf
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    References listed on IDEAS

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    Cited by:

    1. Somov Dmitriy A., 2013. "Specific Features of Complex Correlation of Factors of Strategic Development of a Company," Business Inform, RESEARCH CENTRE FOR INDUSTRIAL DEVELOPMENT PROBLEMS of NAS (KHARKIV, UKRAINE), Kharkiv National University of Economics, issue 5, pages 272-277.

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    More about this item

    Keywords

    Business definition; domain choice; electrical wholesale sector; performance differences; variance decomposition;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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