The persistence of profits, sectoral heterogeneity and firms' characteristics

Maurizio Luigi Baussola, Eleonora Bartoloni

Risultato della ricerca: Contributo in rivistaArticolo in rivista

10 Citazioni (Scopus)

Abstract

The analysis of the persistence of profits has long been a controversial issue within empirical industrial organisation literature. The aim of our paper is to provide new empirical findings that may account for patterns of both sectoral and firm profit persistence. The distinctive feature of our study is that we analyse a number of firms' ergodic distribution in each sector according to their profit level; we then calculate the difference between such a distribution and that prevailing in manufacturing as a whole. Finally, we break down this distribution; the resulting breakdown highlights the impact of each transition probability on inter-sectoral differences clearly, and it also emphasises the role of intra-sectoral dynamics in determining different persistence patterns. We then apply this methodology to both innovating and non-innovating firms, and conclude that among surviving firms innovation is indeed crucial to the persistence of profits. In addition, we set up an econometric test which enables us to estimate the impact of firm and sectoral characteristics on a firm's profit condition.
Lingua originaleEnglish
pagine (da-a)87-111
Numero di pagine25
RivistaInternational Journal of the Economics of Business
Volume16
DOI
Stato di pubblicazionePubblicato - 2009

Keywords

  • Innovation
  • Markov chains
  • Ordered probit
  • Persistence
  • Profitability

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