Sources of performance heterogeneity in emerging economies

Francisco Diaz Hermelo (Business, Society and Economy, IAE – Universidad Austral, Buenos Aires, Argentina)
Hernan Hetiennot (Accounting, IAE – Universidad Austral, Buenos Aires, Argentina)
Roberto S. Vassolo (Business Policy and Strategy, IAE – Universidad Austral, Buenos Aires, Argentina)

Management Research

ISSN: 1536-5433

Publication date: 12 August 2014

Abstract

Purpose

The purpose of this paper is to explore location effects on firm performance in emerging economies simultaneously accounting for permanent and transitory country, industry, country-industry and firm-specific effects.

Design/methodology/approach

The authors utilize a novel methodological approach: an autoregressive, cross-classified, mixed-effect linear regression model that allows them to simultaneously estimate a permanent (long-run) component, a transitory (short-run) component and the speed of decay of the transitory (autoregressive) component.

Findings

The authors find that the firm-specific effect is most important in explaining permanent and transitory differences. The country–industry interaction is the second most important effect, confirming that industries are not completely global and are still subject to country conditions. Broader views of the country–business context and industry conditions taken independently would be incomplete unless the country–industry interactions are considered. In other words, country matters because industry matters and vice versa. Country effects are also significant, but only transitory emphasizing the dynamic nature of emerging economies and the shortcomings that may result from considering the country business context static. Finally, the authors find that the chances of achieving sustainability of abnormal returns in emerging economies are dynamic and have significantly increased recently.

Originality/value

To the authors' knowledge, this is the first to simultaneously estimate country, industry, country–industry and firm effects on the permanent and transitory components of abnormal returns in a sample of emerging economies. The study generates important evidence regarding the sources of sustainable differentiation for firms competing in emerging economies. Finally, the authors find that chances of achieving sustainability of abnormal returns in emerging economies are dynamic and have significantly increased recently.

Keywords

Citation

Diaz Hermelo, F., Hetiennot, H. and S. Vassolo, R. (2014), "Sources of performance heterogeneity in emerging economies", Management Research, Vol. 12 No. 2, pp. 176-202. https://doi.org/10.1108/MRJIAM-03-2014-0544

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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