SCP-relevance and class-effect in performance – A comparative analysis of restaurants and petroleum firms

Abstract

The importance of industry-specific factors for a firm's performance has often attracted the attention of researchers, managers, and investment analysts. This research uses random-effect variance component analysis to examine the relevance of structure-conduct-performance (SCP) paradigm in the context of restaurant and petroleum/natural gas firms. The study further investigates class-effect in firm performance by analyzing whether the relative importance of industry-and-firm-level effects varies across different performance groups. Results suggest a direct relevance of the SCP paradigm and industry-specific factors for firm performance, and a distinct dominance of industry-effect over firm-effect regardless of the choice of accounting or value based performance measures. Results further reveal varying roles of industry and firm-level factors (corporate or strategic) across middle-of-the road and non-average (exceptional) performance groups. As such the importance of SCP paradigm and the strategic role of both industry-and-firm effect factors for value creation in US based restaurant firms is better understood.