The Variance Composition of Firm Growth Rates
The Variance Composition of Firm Growth Rates
Autor Correspondente: Luiz Artur Ledur Brito | [email protected]
Palavras-chave: variance components, growth, competitive advantage
Resumos Cadastrados
Resumo Inglês:
Firms exhibit a wide variability in growth rates. This can be seen as another manifestation of the fact that firms
are different from one another in several respects. This study investigated this variability using the variance
components technique previously used to decompose the variance of financial performance. The main source of
variation in growth rates, responsible for more than 40% of total variance, corresponds to individual,
idiosyncratic firm aspects and not to industry, country, or macroeconomic conditions prevailing in specific years.
Firm growth, similar to financial performance, is mostly unique to specific firms and not an industry or country
related phenomenon. This finding also justifies using growth as an alternative outcome of superior firm
resources and as a complementary dimension of competitive advantage. This also links this research with the
resource-based view of strategy. Country was the second source of variation with around 10% of total variance.
The analysis was done using the Compustat Global database with 80,320 observations, comprising 13,221
companies in 47 countries, covering the years of 1994 to 2002. It also compared the variance structure of growth
to the variance structure of financial performance in the same sample.
