How Much Does the Interaction Between Firm and Industry Matter?

Informações

Código: ESO2742
Divisão: ESO - Estratégia em Organizações
Tema de Interesse: Tema 09 - Modelagem e Mensuração do Desempenho

Autores

Eduardo Loebel, Felipe Zambaldi

Resumo

An ongoing debate on different and sustainable profitability sources among competing firmsis central within the strategy and organizational literature. Numerous studies tried to demonstratethat the main influences on persistent profitability may be explained by industry, firm, temporal andothers effects. Traditionally, this debate finds support in two dominant perspectives, predominantlyemploying the logic of contrast to compare the effectiveness of the firm-focused resource-basedview (RBV) and sometimes dynamic capabilities with the industry-focused industrial organizationview (IO) in explaining performance differences. The present research concentrates on a thirdinteraction perspective according to which these dominants perspectives are viewed ascomplements rather than contrasts.By carrying out a quantitative analysis on the data made available by the publication on theranking of firms of the Diario do Grande ABC newspaper, the main purpose of this paper is toestablish whether a firm–industry interaction effect is a co-determinant of business performance andthus complements the industry and firm effects usually found to be significant in most of theprevious research. The sample included 758 observations of 146 firms in 68 industries and relate tothe period between 2001 and 2008.Much of the research in the variance decomposition stream employed variance componentanalysis (VCA) and regression. However, the study of industry and firm effects on firm’sperformance has hierarchical nature, with two levels of analysis (industry and firm), and therefore,multilevel modeling is a more consistent method. For this reason, a multilevel regression model iscarried out to explore the different drivers of business performance in the studied context. Bayesianestimation was employed because of its adherence in coping with outliers, usually observations ofinterest when abnormal returns are under study.As results, we found that residual unexplained variance of performance attributable toindustry effects according to the fitted model is approximately 46.32%, while the remaining 53.68%is attributable to the firm effect. However, the effect of the interaction between firm and industrywas not statistically significant. Also, the cumulative wealth created by the firm during the years ispositively and significantly related to future performance, reinforcing the assumption of thedynamic capabilities perspective that performance maintenance is related to the trajectory of thefirm.These findings add relevance to the debate on the interaction between industry and firmeffect, which has been found to be both significant and insignificant in different previous studies.To better understand in which conditions this effect will be significant, research on businessperformance faces the opportunity of developing meta-theory including the dynamic capabilitiesview and the resource dependence theory with managerial implications; even though it is suggestedhere that the interaction between firm and industry does not really matter, our results indicate thatwhat the firm individually does, on the run, matters a lot.

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