MARKET, CORPORATION AND BUSINESS UNIT EFFECTS:WHAT DO THEY ACCOUNT FOR?

Matko Koljatic () and Fernando Lefort
Additional contact information
Matko Koljatic: Escuela de Administración, Pontificia Universidad Católica de Chile

Abante, 1999, vol. 2, issue 1, 23-50

Abstract: Using a variance decomposition analysis the empirical literature on strategic management has determined the percentages of total rates of return’s variance due to corporation, market and business-unit effects. However, we still do not know what specific characteristics of corporations and markets cause the observed persistent differences in the returns of business units. In summary, the analysis of variance puts names to our ignorance. The main purpose of this paper is to show that the variance decomposition analysis is limited in its ability to explain the determinants of business unit performance. Our results show that the relative importance of corporation, industry and business unit effects change depending upon the estimation procedure and the model specification used. In particular, we find that part of the business unit effect may, in fact, be related to industry characteristics. We also show that firm diversification and market concentration tend to improve business unit performance.

Keywords: Business Unit Performance; Diversification; Market Concentration (search for similar items in EconPapers)
JEL-codes: L10 M21 (search for similar items in EconPapers)
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.abante.cl/files/ABT/Contenidos/Vol-2-N1/2%20Koljatic%20Lefort.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pch:abante:v:2:y:1999:i:1:p:23-50

Ordering information: This journal article can be ordered from

Access Statistics for this article

Abante is currently edited by Eduardo Walker

More articles in Abante from Escuela de Administracion. Pontificia Universidad Católica de Chile. Contact information at EDIRC.
Bibliographic data for series maintained by Eduardo Walker ().