explain and create a discussion

Research Made Relevant performance was due to these firm Lor some time now, scholars have attributes, but that more than half of I been interested in the relative impact this 80 percent (46.38 percent) was due of the attributes of the industry within to stable firm effects. The importance which a firm operates and the attributes of stable firm differences in explain- of the firm itself on its performance. The first work in this area was published ing differences in firm performance is by Richard Schmalansee. Using a single also inconsistent with the S-C-P frame- year's worth of data, Schmalansee esti- work. These results are consistent with mated the variance in the performance another model of firm performance of firms that was attributable to the called the resource-based view, which industries within which firms operated will be described in Chapter 3. versus other sources of performance Since Rumelt's research, efforts to variance. Schmalansee's conclusion was identify the factors that explain variance that approximately 20 percent of the The Impact of Industry and in firm performance have accelerated. variance in firm performance was ex- Firm Characteristics on Firm At least nine articles addressing this plained by the industry within which a Performance issue have been published in the lit- firm operated-a conclusion consistent Rumelt's results were consistent with erature. One of the most recent of these with the S-C-P model and its emphasis Schmalansee's in one sense: Rumelt also suggests that, while the impact of the on industry as a primary determinant of found that about 16 percent of the vari- industry and the corporation on busi- a firm's performance. ance in firm performance was due to ness unit performance can vary across Richard Rumelt identified some industry effects, versus Schmalansee's industries and across corporations, weaknesses in Schmalansee's re- 20 percent. However, only about half of overall, business unit effects are larger search. Most important of these was this industry effect was stable. The rest than either corporate or industry effects. that Schmalansee had only one year's represented year-to-year fluctuations in Sources: R. P. Rumelt (1991). "How much does worth of data with which to exam- the business conditions in an industry. industry matter?" Strategic Management Journal, ine the effects of industry and firm at- This result is broadly inconsistent with 12. pp. 167-185; R. Schmalansee (1985). "Do tributes on firm performance. Rumelt the S.C.P model. markets differ much?" American Economic Review, 75, pp. 341-351; V. E. Misangyi, H. Elms, was able to use four years' worth of Rumelt also examined the im T. Greckhamer, and J. A. Lepine (2006). "A new data, which allowed him to distinguish pact of firm attributes on firm per perspective on a fundamental debate: A multi- level approach to industry, corporate, and busi- between stable and transient industry formance and found that more than ness unit effects." Strategic Management Journal and firm effects on firm performance. 80 percent of the variance in firm 27(6), pp. 571-590