Sources of Firm Performance Differences in the U.S. Food Economy

Journal of Agricultural Economics 64 (2)

Posted: 5 May 2013

See all articles by Mario P. Mondelli

Mario P. Mondelli

Center for Economic Research - CINVE

Fabio R. Chaddad

University of Missouri

Date Written: June 1, 2012

Abstract

Researchers in economics and strategy have long been interested in understanding the determinants of firm performance. We apply the relatively novel approach of hierarchical linear modelling (HLM) to a large panel of food economy firms to shed new light on the long-standing debate about the relative importance of industry, corporate parent and business unit effects on firm profits. Our results suggest that business unit and corporate effects are more relevant than industry effects in explaining firm performance differences in the food economy. In addition, we also explore the effect of specific strategic factors on performance within each level of analysis. In particular, we find that business-segment size, industry barriers to entry, corporate diversification, R&D intensity, capital intensity and resource availability are significant predictor variables that explain firm performance differences. Given the relatively important role of corporate effects and the positive influence of corporate strategic variables on business unit performance, our findings suggest that the environment provided by corporate parents significantly affects business unit profitability. In other words, corporate strategy does matter and thus should continue to draw attention from scholars interested in explaining profitability in the food economy.

Suggested Citation

Mondelli, Mario P. and Chaddad, Fabio R., Sources of Firm Performance Differences in the U.S. Food Economy (June 1, 2012). Journal of Agricultural Economics 64 (2), Available at SSRN: https://ssrn.com/abstract=2260806

Mario P. Mondelli

Center for Economic Research - CINVE ( email )

Uruguay 1242
Montevideo, 11100
United States

HOME PAGE: http://www.cinve.org.uy/mondelli/index.html

Fabio R. Chaddad (Contact Author)

University of Missouri ( email )

Columbia, MO 65211
United States

HOME PAGE: http://dass.missouri.edu/agecon/faculty/chaddad-f.php

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