On the Matter of How Much Industry Matters

Haifeng Wang and Russell Coff

Strategic Management Review, 2022, vol. 3, issue 2, 295-323

Abstract: Richard Rumelt shook the strategy field with his variance decomposition study by concluding that industry and corporate effects on performance were surprisingly small. At the time, many scholars were focusing much of their effort on studying topics like corporate strategy and competitive dynamics. This spurred a flurry of replication studies that sought to tweak the methodological approach in multiple ways — perhaps seeking a markedly different answer to the question. At the same time, it fueled the nascent resource-based view by focusing more attention on business unit resources and capabilities as drivers of performance. This article explores both the theoretical and empirical innovation that resulted from the flood of inquiry. It then identifies subsequent opportunities that remain to be explored.

Keywords: Variance component analysis; firm performance; industry-; corporate- and business unit- effect; Industrial organization (IO) economics; resource-based view; strategic management (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:now:jnlsmr:111.00000045

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