Emeritus Professor of Finance
Journal Article | Strategic Management Journal | 26 | November 2005
Is Performance Driven by Industry - or Firm-specific Factors? A Reply to McNamara, Aime and Vaaler
The authors revisit the questions of identification of outlying firms within industries and their impact on the relative importance of firm- and industry-specific factors for firm performance.In response to McNamara, Aime and Valler (2005), they argue that the key results in Hawawini, Subramnian and Verdin (2003) are insensitive to the varying methods used to identify firm outliers.Further, the authors argue that conducting tests on industry outliers is inconsistent with what is indicated by theory and past empirical results on the relative importance of firm and industry effects to firm performance.Firm effects may matter most for outperforming and underperforming firms, while industry effects may be at least as important to firms 'stuck in the middle'.