Strategy and industry effects on profitability: evidence from Greece

Abstract

Abstract The present study examines the impact of firm and industry‐specific factors on profitability, using census data on Greek manufacturing. At the firm level, particular attention is given to strategy effects. Based on a modification of Porter's typology, these effects are captured through different forms of both ‘pure’ and ‘hybrid’ strategies. Industry effects are represented using industry concentration, entry barriers, and growth. Hypotheses are developed taking into account both previous research and the particular idiosyncrasies of the national context. The results obtained provide important insights on specific determinants of firm profitability. With respect to strategy, results confirm the hypothesis that hybrid strategies are clearly preferable compared to pure ones. In addition, it was found that the more generic strategy dimensions are included in the strategy mix, the more profitable the strategy is, provided that one of the key ingredients is low cost. Industry‐level effects, although weaker, show strong impact of industry entry barriers. Moreover, the findings suggest that while both sets of factors significantly contribute to firm profitability, firm‐specific factors explain more than twice as much profit variability as industry factors. Copyright © 2003 John Wiley & Sons, Ltd.

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