We assess the relative importance of firm and industry effects on corporate profitability in India for a sixteen year period and evaluate the changing balance between these effects as a regime of control and regulation, pre 1985, gave way to partial liberalization between 1985 and 1991 and to more decisive liberalization after 1991. We test the significance of the variance components, the differences between them and their changes over time. We find that firm effects are significant in all periods, when rent seeking opportunities proliferated, as well as when the scope for strategic decisions increased under competition brought about by institutional change. These effects become more pronounced over time. While the industry effect does statistically matter, in general, it is significantly large in the period after comprehensive liberalization, relative to other periods, suggesting that industry choice also matters within competitive markets for firms to enjoy above average profitability.
|Publication status||Published - 1 Jan 2010|
|Event||2010 Academy of Management Annual Meeting - Montreal, Canada|
Duration: 6 Aug 2010 → 10 Aug 2010
|Conference||2010 Academy of Management Annual Meeting|
|Period||6/08/10 → 10/08/10|
Majumdar, S. K., & Bhattacharjee, A. (2010). The profitability dynamics of Indian firms. Paper presented at 2010 Academy of Management Annual Meeting, Montreal, Canada. http://program.aomonline.org/2010/submission.asp?mode=ShowSession&SessionID=1714