Determinants of firm performance: The relative importance of economic and organizational factors

1 September 1989

journal article
research article
Published by Wiley in Strategic Management Journal

Vol. 10 (5) , 399-411
https://doi.org/10.1002/smj.4250100502

Abstract

We decompose the inter‐firm variance in profit rates into economic and organizational components. Using a representative model from each paradigm we find that both sets of factors are significant determinants of firm performance. Further findings are that the two effects are roughly independent and that organizational factors explain about twice as much variance in profit rates as economic factors.

Keywords

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