A New Perspective on a Fundamental Debate: A Multilevel Approach to Industry, Corporate, and Business Unit Effects

Strategic Management Journal (Impact Factor: 3.78). 06/2006; 27(6):571 - 590. DOI: 10.1002/smj.530

ABSTRACT We utilized a multilevel approach to both estimate the relative importance of industry, corporate, and business segment effects on firm performance, as well as to demonstrate how it enables the investigation of specific strategic factors within each class of effects. Our results confirmed previous findings suggesting that although business segment effects carry the most relative importance, industry and corporate effects are also important. Among the findings regarding specific factors, we found that industry concentration and munificence, as well as the resource environment provided by corporate parents, impact performance. These findings suggest that investigators should consider both industry and corporate environments when examining performance. Copyright © 2006 John Wiley & Sons, Ltd.

    • "The remaining residuals after the introduction of two or more different effects are only independent of the order of introduction if collinearity between the considered effects is zero. This, however, is usually not the case (Misangyi et al., 2006). Therefore, in order to get a correct picture of effect magnitudes, all possible combinations of effect introduction according to Figure 1 have to be considered. "
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    • "herein the order in which effects are entered into the model potentially influences the results ( Short et al . , 2006 ) . Multilevel analysis also allows us to capture and model the determinants of each firm ' s year - to - year growth in the separate components of CEO compensa - tion , thus capitalizing on utilizing time as a level of analysis ( Misangyi et al . , 2006 ) thereby allowing us to fully assess the effects of temporal influences . Finally , multilevel analy - sis permits moving beyond the mainly descriptive partitioning of variance to potentially identify cross - level re - lationships and examine causal relationships ( Hought , 2006 ) . Our study is able to contribute to the spirited deba"
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    • "This result informed the continuing debate about the importance of the market relative to the firm (Bowman, 1990) by showing that business-unit performance is influenced by both industry structure (Bain, 1956; Schmalensee, 1985) and corporate strategy—that is, by how corporations manage a set of businesses together (Bowman and Helfat, 2001; Grant, 2010). Several subsequent studies have found that the corporate effect is important (McGahan et al., 1997; Misangyi et al., 2006), including studies that estimate the corporate effect in conjunction with other effects, like geography (Makino et al., 2004), business groups (Chang and Hong, 2002; Short et al., 2007), institutional change (Walker, Madsen, and Carini, 2002), and firm-level characteristics (Bowman et al., 2001; Brush, Bromiley, and Hendrickx, 1999). "
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