How much does country matter?

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Several factors affect firms performance. Components of variance technique has been used to identify and quantify industry, firm and corporate effects using data of US business environment establishing an active debate between the structure-conduct-performance model and the resource-based view in strategy. Using data from the COMPUSTAT global database, covering 78 countries, this paper proposes and analyzes a new type of effect: the country effect. An empirical study with 60,092 observations, 12,592 firms, and 448 industry sectors shows that country effects do exist, and quantifies them for different economic sectors. The research also estimates the country-industry interaction that could be linked to the phenomenon of clusters and reassesses the composition of performance variance for an international environment identifying similarities and differences to previous studies using US data only.

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