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Article
Publication date: 1 February 2004

Hsiu‐Lang Chen

This paper investigates whether style migration affects industry evolution. The study documents industry evolution in terms of market weights, returns, and risks over the…

Abstract

This paper investigates whether style migration affects industry evolution. The study documents industry evolution in terms of market weights, returns, and risks over the sample period from 1966 to 2000. The study shows that investment styles migrate in different degrees across different industries over time. In addition, the relation between industry evolution and style migration is neither simple nor static. The paper shows that growth‐value migration has predictability about the industries' returns and changes in volatility. Furthermore, style migration in the industry is mainly driven by existing firms changing their investment styles, not by new entrants to the industry causing style shifts. Both investment theory and its application to investment management critically depend on our understanding of stock return persistence anomalies. The ability to outperform buy‐and‐hold strategies by acquiring past winning stocks and selling past losing stocks, commonly referred to as “individual stock momentum,” remains one of the most puzzling of these anomalies. Moskowitz and Grinblatt (1999) attribute the bulk of the observed momentum in individual stock returns to industry momentum—the tendency for stock return patterns at the industry level to persist. It is well known that there are hot and cold IPO markets, and hot and cold sectors of the economy. Investors may simply herd toward (away from) these hot (cold) industries and sectors, causing price pressure that could create return persistence. The recent attraction to internet stocks is perhaps the latest manifestation of such behavior, which is not unlike a similar pattern biotechnology firms and railroad firms witnessed in 1980s and 1900s, respectively. For the active portfolio manager, rotation among different industries may provide opportunities for portfolio performance enhancement. As a result, understanding both the evolution of industries and the style factors causing cyclical variation in industry returns and risk plays an important role in professional portfolio management. Given the fact that a number of researchers have found consistent differences among the returns of various equity classes, investment styles of size and growth‐value are natural candidates for studying what causes cyclical variation in industry returns and risks. Individual investment styles perform differently during various stages of a cycle of bull market and bear market. For example, small cap stocks outperformed large cap stocks in the 1970s, but large cap stocks outperformed small cap stocks in the 1980s. Growth stocks outperformed value stocks in 1998 while the opposite occurred in 1997. Although it is well documented that the cross‐sectional variation in expected returns can be captured by three factors: market, size, and book‐to‐market, it is not yet clear whether cyclical variations in style attributes, not style returns, influence cross‐sectional variation in expected returns and return variance. In the investment industry, cyclical variation in style attributes is commonly called style migration. Perez‐Quiros and Timmermann (2000) provide a rational suggestion that small firms are most strongly affected by tighter credit market conditions in a recession and thus cyclical variations in style performance result from business cycles. As certain equity classes took off and others fell out of favor, investors overreacted, thereby causing cyclical variations in returns and risks of industries where firms are similarly sensitive to the fundamental shocks. In a recent study of behavioral finance, Barberis and Shleifer (2003) argue that in the presence of switchers who can affect asset prices by moving funds across styles, a style‐level momentum strategy could be successful because good performance by a style attracts switcher flows, which then drive the prices even higher. Analyzing the extent of interaction between style migrations and industry evolution may shed light on understanding the sources of predictable components in industry returns and risk. This paper provides such a contribution to the literature. The rest of the paper is organized as follows. Section I describes the sample data and summarizes industry evolution in terms of market capitalization weights in the entire market over time. Section II analyzes style migration within each industry. Section III examines the effect of style migration on industry evolution. Section IV concludes.

Details

Review of Accounting and Finance, vol. 3 no. 2
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 5 October 2015

Jian-yu Fisher Ke, Robert J. Windle, Chaodong Han and Rodrigo Britto

The purpose of this paper is to propose that transportation modal mix in global supply chains is a result of the strategic alignment between industry characteristics and…

Abstract

Purpose

The purpose of this paper is to propose that transportation modal mix in global supply chains is a result of the strategic alignment between industry characteristics and supply chain strategies.

Design/methodology/approach

Using annual US trade statistics and manufacturing industry data for the years 2002-2009 between the USA and its top 12 Asian trading partners, this study applies various regression methods to examine key factors associated with the transport modal decision.

Findings

The results show that industry characteristics have an impact on the transportation modal mix in global supply chains. Manufacturing industries use more air freight and less ocean freight when facing positive sales surprises, high-monthly demand variation, a high-contribution margin ratio, a high cost of capital, and increased competition.

Practical implications

The findings provide important insights for logistics managers and freight forwarders. While transportation cost remains an important concern, a logistics manager must also consider non-cost factors such as competition, working capital, and demand uncertainties in their modal decisions. Freight forwarders should be supply chain solution providers who consider all of these industry factors and suggest a proper mix of transportation modes for their customers.

Originality/value

This study is among the first efforts to examine the impact of industry characteristics on the transportation modal mix in global supply chains. This study first develops a theoretical framework for the modal choice decision for international transportation movements and then, using an extensive and innovative data set, provides new findings regarding current air freight practices in global supply chains.

Details

International Journal of Physical Distribution & Logistics Management, vol. 45 no. 9/10
Type: Research Article
ISSN: 0960-0035

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Article
Publication date: 13 September 2011

Rifat Kamasak

Considerable research efforts have been made to investigate the relative importance of firm‐specific vs industry structure factors in relation to performance variation

Abstract

Purpose

Considerable research efforts have been made to investigate the relative importance of firm‐specific vs industry structure factors in relation to performance variation among firms in the past. However, the vast majority of the research comes from the USA and very little is known about results outside of this domain. The aim of this study was to investigate industry and firm factors producing performance differences among Turkish firms. In order to explore the contributions of firm‐level factors and structural characteristics of industries, the study decomposes the relative impact of industry and firm effects on overall performance which includes the performance items such as sales turnover, market share and profitability.

Design/methodology/approach

A quantitative, positivistic approach was adopted with respect to the methodological choice for this study. In order to measure the relative impact of industry and firm effects on performance, the questionnaire developed by Galbreath and Galvin was sent to the e‐mail addresses of the general managers or the other executives at the top level as a web‐link with a covering letter. Because unit of analysis is at the firm level, a single informant is used in the study and the questionnaire was mailed to only one executive from each firm. Having collected the data, the effects of firm‐level factors (resources and capabilities) and industry structure on performance variation were analyzed by hierarchical regression method.

Findings

A total of 259 firms from different industries were analyzed and the findings revealed that firm‐level resources had a greater effect in explaining performance variation than industry structure in the Turkish business context. The results of this study confirm that in the resource‐based view of the firm, the firms in Turkey “demonstrated a quite developed form of organizational learning” just like the other emerging economies (i.e. Taiwan, Brazil, Poland and South Korea). Within this framework, Turkish firms especially in automotive, textile, food, tourism and construction industries became important players in the global arena.

Originality/value

This study contributes to the strategic management literature, particularly, in terms of providing comparable data from an emerging country, which is significant in verifying resource‐based theory and generalizing results in a global context. The findings also suggest that the firms need to focus on their unique resources rather than try to control and manipulate structural forces in their industries since “the economies today might best be viewed as resource‐based economies”. It should be noted that, in this business era, the key challenge for the managers is the optimal deployment of existing strategic resources in order to make their organizations achieve sustainable competitive advantage and superior firm performance.

Details

Management Research Review, vol. 34 no. 10
Type: Research Article
ISSN: 2040-8269

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Book part
Publication date: 21 May 2007

Miles Corak and Wen-Hao Chen

Administrative data on the universe of employees, firms, and unemployment insurance (UI) recipients in Canada over an 11-year period are used to examine the operation of…

Abstract

Administrative data on the universe of employees, firms, and unemployment insurance (UI) recipients in Canada over an 11-year period are used to examine the operation of UI using the firm as the unit of analysis. Persistent transfers through UI are present at both industry and firm levels, and an analysis using firm fixed effect indicates that an important fraction of variation in them can be attributed to firm effects. Calculations of overall efficiency loss are very sensitive to the degree to which firm-level information is used. A full appreciation of how UI interacts with the labour market requires recognition of the characteristics and human resource practices of firms.

Details

Aspects of Worker Well-Being
Type: Book
ISBN: 978-1-84950-473-7

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Article
Publication date: 6 November 2009

Mary E. Graham and Julie L. Hotchkiss

The purpose of this paper is to propose a proactive public policy approach to complement relatively reactive existing policies addressing gender‐related employment…

Abstract

Purpose

The purpose of this paper is to propose a proactive public policy approach to complement relatively reactive existing policies addressing gender‐related employment disparities in the USA, and to provide an initial empirical illustration of the proposal.

Design/methodology/approach

The paper provides a conceptual application of theories of total quality management (TQM) to the topic of gender‐related employment disparities, followed by an empirical illustration using US Current Population Survey data and a gender equal employment opportunity (EEO) scorecard.

Findings

Using the TQM framework, company outliers were conceptualized on the EEO scorecard as “special” causes of economy‐wide equal employment variation and the industries in which companies are situated as “common” causes. The paper identifies two underperforming industries on gender‐related employment outcomes: Mining and Construction, and Transportation, Communication and Utilities.

Research limitations/implications

Further conceptual work on the application of TQM to gender disparities in employment is recommended. Also, the study considered broad industry categories; future research should refine these categories further.

Practical implications

It is recommended that US enforcement agencies incorporate industry considerations more explicitly into their activities. Employer insights may be beneficial to improving equal employment opportunity performance at the industry level.

Originality/value

The application of TQM theory to the topic of gender‐related employment disparities is a novel approach that may motivate new public policies.

Details

Gender in Management: An International Journal, vol. 24 no. 8
Type: Research Article
ISSN: 1754-2413

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Article
Publication date: 29 November 2018

Luiz Paulo Lopes Fávero, Ricardo Goulart Serra, Marco Aurélio dos Santos and Eduardo Brunaldi

The purpose of this paper is to analyze the influence of firm-, industry- and country-level determinants on real annual sales growth in the context of a cross-classified…

Abstract

Purpose

The purpose of this paper is to analyze the influence of firm-, industry- and country-level determinants on real annual sales growth in the context of a cross-classified multilevel perspective.

Design/methodology/approach

The authors studied 11,381 firms from 17 industries in six Latin American countries based on the data collected up to 2015. Since the data are nested in two levels (level 1: firms; level 2: cross-classification of industries and countries), the authors use a cross-classified multilevel model. The significant variability in all levels of analysis confirms the option for the multilevel model.

Findings

Differences in industries account for the largest proportion of variance (77.2 percent). This finding indicates that industry-level characteristics should be explored in the sales growth literature (it seems to the authors that they were neglected). This finding also calls attention to the roles of policy-makers in facilitating firm growth. The final model indicates that the considered variables explain approximately 55 percent of the differences in real annual sales growth in the same industry and country after having accounted for the impacts of the differences in firms. After accounting for the impacts of the differences in firms’ and countries’ characteristics, 43 percent of the variation in average real annual sales growth is due to differences in industries. The obtained results indicate that while firms from countries with higher GDP growth and more effective corporate boards present higher real annual sales growth, firms that operate in commodity producer industries have worse performance in this indicator. With respect to firm’s characteristics, larger firms (contradicting Gibrat’s law) and exporters grew less. Some results could be explained by the decrease in commodities’ prices and global purchases between 2012 and 2015.

Originality/value

The paper fills some gaps in the firm growth literature by testing Gibrat’s law in non-developed countries (not yet done, to the best of the authors’ knowledge) and exploring variables other than size in the explanation of firm growth (rarely used, to the best of the authors’ knowledge). Moreover, the adopted model correctly estimated the origin of the variability in firm growth in its natural cross-classified distinct levels.

Details

International Journal of Emerging Markets, vol. 13 no. 5
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 21 September 2015

Michael W. Hansen and Wencke Gwozdz

The purpose of this paper is to examine the evolution in subsidiary performance and the factors influencing this performance based on a unique database of approximately…

Abstract

Purpose

The purpose of this paper is to examine the evolution in subsidiary performance and the factors influencing this performance based on a unique database of approximately 800 multi-national company (MNC) subsidiaries in developing countries. Developed-country multi-national companies (MNCs) are increasingly establishing subsidiaries in developing countries. The potential gains are high; however, so are the risks. While the issue of subsidiary performance should be at the heart of any international business (IB) enquiry into MNC activity in developing countries, surprisingly little research has examined this issue.

Design/methodology/approach

Based on a comprehensive literature review of the IB performance literature, it is hypothesized that subsidiary performance essentially is shaped by five clusters of factors: location, industry, MNC capabilities, subsidiary role and entry strategy. These factors’ ability to explain variance in subsidiary performance is tested through a multiple regression analysis.

Findings

MNC subsidiary performance in developing countries has improved enormously in recent decades. Especially, MNC capability and subsidiary role-related factors appear to explain variance in performance, while location factors appear to have less explanatory power. This suggests that strong MNC capabilities and organization can make MNCs succeed regardless of location.

Practical implications

The key preparatory work for MNCs contemplating entry into developing countries is to carefully scrutinize internal capabilities and organization.

Originality/value

The paper presents a model for explaining variation in subsidiary performance in developing countries specifically. The paper offers unique empirical insights into the state and drivers of subsidiary performance in developing countries.

Details

The Multinational Business Review, vol. 23 no. 3
Type: Research Article
ISSN: 1525-383X

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Article
Publication date: 29 November 2018

Chiedza Ndlovu and Paul Alagidede

The purpose of this paper is to examine the impact of industry structure and macroeconomic indicators on return on equity (ROE) of listed financial services firms.

Abstract

Purpose

The purpose of this paper is to examine the impact of industry structure and macroeconomic indicators on return on equity (ROE) of listed financial services firms.

Design/methodology/approach

Herfindahl–Hirschman Index concentration scales were used to categorise industries into competitive, moderate and concentrated segments, while Arbitrage Pricing Model principles were used to capture the effect of macroeconomic fundamentals on ROE. Generalised method of moments estimator was used to model random effects which were supported by the Hausman test.

Findings

Findings suggest that the influence of macroeconomic fundamentals on ROE deteriorates as one moves from competitive to concentrated industries. ROE is volatile in concentrated markets and less volatile in competitive markets. Concentrated markets generally enjoy monopoly profits. Gross domestic product and interest rates have a positive impact on ROE, while inflation, unemployment and exchange rates have a negative effect.

Originality/value

This study highlights the need to apply appropriate business strategies and policies depending on the structure of the industry. Competitive advantage strategies may assist in sustaining profits of firms in competitive markets. Regulators need to be proactive and stress test the impact of a policy on industry performance before implementation because competitive and concentrated markets react differently to external shocks. Risk tolerant investors may invest in volatile markets such as Russia and South Africa, while risk-averse investors may prefer to invest in less volatile markets such as India and China.

Details

International Journal of Emerging Markets, vol. 13 no. 6
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 6 September 2011

Susan J. Linz and Ilya Rakhovsky

Did the Soviet development strategy of according high priority to firms in heavy industry give these firms an advantage during Russia's transition to a market‐oriented…

Abstract

Purpose

Did the Soviet development strategy of according high priority to firms in heavy industry give these firms an advantage during Russia's transition to a market‐oriented economy? This paper seeks to answer this question.

Design/methodology/approach

To document industry variation in efficiency between priority and non‐priority sectors, the paper uses firm‐level data collected in 1992 and 1995 to estimate a stochastic frontier production function for 11 industries. It then aims to investigate which firm characteristics contributed to variation in technical efficiency between 1992 and 1995.

Findings

Firms in low‐priority sectors exhibited higher efficiency in 1992 than firms in high‐priority sectors; by 1995, efficiency differences diminish. Efficiency gains were relatively higher in industries which experienced the largest percentage output declines. Non‐state ownership tends to improve efficiency, but the ownership effect varies by industry and over time. The paper rejects the hypothesis that export experience increases efficiency, and this result is especially strong in 1995. Location in Moscow proved to be a positive factor, and the benefit grew over time.

Research limitations/implications

Panel data were not used because near‐hyper‐inflationary conditions and changes in capital valuation methods make it impossible to accurately adjust output and capital values between 1992 and 1995; and because firms that divided into multiple units or changed industry classification between 1992 and 1995 would need to be dropped, reducing sample size considerably and making industry‐level analysis impossible.

Practical implications

The paper provides a baseline for analyzing the impact of the transition on the performance of Russian manufacturing firms. It evaluates the influence of location (capital city effect) on firm performance, and demonstrates that privatization alone is not sufficient to improve efficiency.

Originality/value

This is the first study to examine the initial impact of transition on the efficiency of Russian firms across 11 industries, with focus on differences between former priority and non‐priority sectors. The results underscore the magnitude of structural dislocation caused by planners' preferences in the former Soviet economy.

Details

Journal of Economic Studies, vol. 38 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

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Article
Publication date: 11 July 2016

Susan Clark Muntean

The political behavior of founders, families and their firms in the form of campaign contributions has not been explored by family business scholars. Yet partisan and…

Abstract

Purpose

The political behavior of founders, families and their firms in the form of campaign contributions has not been explored by family business scholars. Yet partisan and ideological campaign contributions raise a range of governance issues and hold implications for myriad stakeholders, including investors, employees, customers and the public. The purpose of this paper compares and contrasts the campaign contributions of founder- and family-controlled firms relative to managerially governed firms and develops theoretical explanations for observed differences.

Design/methodology/approach

This paper develops a “principal owner” hypothesis based upon a typology of firm ownership characteristics (founder/family control or not; publicly traded or privately held). This hypothesis is tested by multivariate empirical analyses of the campaign contributions of 251 firms across 14 industries with four types of ownership structures.

Findings

Founder- and family-controlled firms are more partisan and ideological relative to other firms in their industry and this finding is consistent across industries. Founders and family members influence political behavior, including in publicly traded firms.

Practical implications

Given potential controversies raised by ideological and partisan campaign contributions and the unpredictable returns on political investment, it behooves founders and their family members to assess the impact of their political behavior on the business and on key stakeholders.

Originality/value

This paper is the first to raise governance issues related to founders’ and families’ political spending and develops original insights into the ideological and political behavior of these businesses.

Details

Journal of Family Business Management, vol. 6 no. 2
Type: Research Article
ISSN: 2043-6238

Keywords

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