Please use this identifier to cite or link to this item:
Title: Inter-industry differences in profitability: The legacy of the structure-efficiency debate revisited
Authors: Lee, C.-Y.
Mahmood, I.P. 
Issue Date: 2009
Citation: Lee, C.-Y., Mahmood, I.P. (2009). Inter-industry differences in profitability: The legacy of the structure-efficiency debate revisited. Industrial and Corporate Change 18 (3) : 351-380. ScholarBank@NUS Repository.
Abstract: This study presents a simple model on the sources of inter-industry variation in profitability and tests its empirical implications in order to shed new light on the long-lasting debate over industry profitability. The model identifies four key factors that jointly influence an industry's price - cost margin: (i) the intensity of strategic investment (e.g. R&D and advertising), (ii) the skewness of the distribution of market share or market concentration, (iii) the appropriability of strategic investment, and (iv) the extent to which firms' market shares are determined by the intensity of their strategic investment. These factors are expected to be positively related to industry profitability, and our empirical analysis provides supportive evidence. The model also suggests that the conventional, single-dimensional hypotheses on profitability - the market-power (or market-structure) hypothesis and the efficiency hypothesis - are overly simplified. More importantly, existing empirical results allegedly supporting each of these hypotheses are spurious to the extent that the distribution of firm-specific strategic competence reflects firm heterogeneity in efficiency and, at the same time, underlies the distribution of market share or market concentration. © The Author 2009. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved.
Source Title: Industrial and Corporate Change
ISSN: 09606491
DOI: 10.1093/icc/dtp009
Appears in Collections:Staff Publications

Show full item record
Files in This Item:
There are no files associated with this item.


checked on Mar 21, 2019


checked on Mar 12, 2019

Page view(s)

checked on Mar 17, 2019

Google ScholarTM



Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.