A quantitative perspective of Porter's industry forces framework for investment analysis

Sang Hoon Jung and Yong Jin Jeong

Managerial and Decision Economics, 2022, vol. 43, issue 1, 48-64

Abstract: Porter's industry forces framework is an important tool for external analysis of firms, but its qualitative nature presents numerous limitations to be used in investment analysis. This study introduces a quantitative perspective of the framework using financial information proxies. This allows investors to gauge the external factors quantitatively and to gain enhanced framework usability. In order to test its validity, the correlation movements of our quantitative perspective have been analysed. For demonstration of enhanced usability, our quantitative perspective, alongside machine learning models, was used to predict business performances. The empirical results indicate that our quantitative perspective of the framework corroborates with its original definition and that it exhibits enhanced usability than the original framework.

Date: 2022
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https://doi.org/10.1002/mde.3358

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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:43:y:2022:i:1:p:48-64

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