The Market Share-Profitability Relationship: Testing Temporal Stability Across Business Cycles

Abstract

Several studies have demonstrated a generally positive association between market share (MS) and business profitability (BP) and that this relationship is dependent on environmental and strategic contexts, but the stability of such results across distinct time periods representing differing business cycles has not yet been demonstrated. This article, employing a comparative static methodology, assesses the stability of the nature of the relationships among strategic resource deployments, market share position, and profitability across two different time periods representing significantly different macroeconomic conditions. The results indicate that the general level of association (i.e., correlation) between MS and BP is stable, but the set of significant strategic factors contributing to both MS and BP is different, indicating variations in strategies for the two different cycles. Some explanations for the observed differences as well as limited generalizations on the market share-profitability relationships are developed.

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