The effects of industry and firm factors in performance persistence

摘要

This study examines the persistence in the incremental components of industry and firm effects on economic profitability and tests the hypotheses that confirm to the conventional wisdom of relative rates of persistence by employing China's business database. A persistence partitioning model is fitted to a new data set, and results show that the incremental effects of industry on economic profitability persist longer than the incremental effects of firm. In other words, long-term competitive advantages of firms in China are more predictable and sustainable on industry influences rather than firm factors. These findings support the predictions of industrial organization economics, and provide some implications to corporate strategy.