DOES INDUSTRY MATTER DIFFERENTLY IN DIFFERENT PLACES? A comparison of industry, corporate parent, and business segment effects in four OECD countries

A central stream in business strategy research explores the locus of firm rent generation by decomposing accounting profits into effects attributable to time, industry, corporate parent, and individual business segment. This paper expands the scope of this work by examining data on firms from Australia, Canada, and the United Kingdom as well as the United States and addressing the importance of understanding geographic influences on firm profits. The empirical analysis corroborates previous findings for the United States, namely that business-specific effects predominate in explaining variance in profits, although industry and corporate parent effects are significant of important magnitude. Cross-national comparisons demonstrate that this general pattern obtains in other countries as well, although results do vary across country. Results of estimates in the manufacturing sector provide further evidence of cross-country differences and suggest that explanations for locus of profit differences across country operate at levels less aggregate than the national level. In motivating the analysis the paper describes methodological and analytical considerations that arise from the introduction of regional influences into the examination of the locus of profits.