Sustainable competitive advantage and profitability persistence: Sources versus outcomes for assessing advantage

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Abstract

This paper explores how variables measuring firms' sustainable competitive advantages influence profitability persistence. Using a large sample of firms from MSCI 23 developed countries during 1985-2013, I find that an index of economic rents (such as size and market share) significantly reduce profit mean reversion, whereas traditional barriers-to-entry measures do not lower mean reversion. Higher previous long-term performance and sustained market share are associated with lower future mean reversion in profitability. Outcomes dominated sources of advantages, although both were useful in predicting future profitability persistence.
Original languageEnglish
Peer-reviewed scientific journalJournal of Business Research
Volume84
Pages (from-to)100-113
ISSN0148-2963
DOIs
Publication statusPublished - 03.2018
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • Mean reversion
  • return on assets
  • competitive advantage
  • barriers-to-entry
  • market share

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