Determinants of industry performance: region vs. country effects in knowledge-intensive service industries

Abstract

Recent variance decomposition studies have started trying to determine the relative importance of industry and firm on profitability, but little research has been done to investigate exactly how much the difference in regions and countries could explain the variation in industry performance. This study explores the sources of knowledge-intensive service industry performance by comparing the relative importance of region, country, and industry effects. Using a variance components model fitted to a new data set, we find that while the country effects dominate industry performance around the world and in all regions (North America, South America, West Europe, East Europe, and Asia), industry effects too play a role in developing the worldwide knowledge-intensive service industries. We also find that regional effects have little significant influence on industry performance.

Keywords:

• industry organisation
• performance
• strategic management
• international economics
• knowledge-intensive service industries

Acknowledgements

Earlier versions of this article have been presented in the Annual Meetings of the Academy of International Business in 2006 and of the Strategic Management Society in 2006. We thank the reviewers and participants of these meetings for their valuable comments on our study. The work described in this article was partially supported by a grant from the National Science Council of Taiwan (NSC 95-2416-H-390-003).