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3 CHAPTER  Copyright © 2013 by The McGraw-Hill Companies, Inc !ll rights reser"e#  McGraw-Hill$Irwin External Analysis: Industry Structure, Competitive Forces, & Strategic Groups

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3CHAPTER

Copyright © 2013 by The McGraw-Hill Companies, Inc !ll rights reser"e# McGraw-Hill$Irwin

External Analysis:Industry Structure,

Competitive Forces,& Strategic Groups

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Part Strategy Analysis

3!"

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#$ 3% Apply t e PES'E# model to organi(e and assess t e impacto) external )orces on t e )irm*#$ 3%" Apply the structure-conduct-performance (SCP) model to explain

the effect of industry structure on firm profitability#$ 3%3 Apply the fi!e forces model to understand the profit potential of the

firm"s industry#$ 3%+ #escribe the strate$ic role of complements in creatin$ positi!e-

sum co-opetition#$ 3% %nderstand the role of industry dynamics and industry

con!er$ence in shapin$ the firm"s external en!ironment#$ 3%- Apply the strate$ic $roup model to re!eal performance differences

bet&een clusters of firms in the same industry

3!3

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Chapter Case '.uild /our 0reams 1./02 to

Sidestep Entry .arriers

C anging *S* car mar4et5ore competition )rom outside t e *S*6o7ever, 8$ ne7 entry )irms in t e last " decades6ig 9arriers to entry

./0 led 9y )ounder, ang C uan)u in C ina isentering t e car mar4et

.atteries to cars;9ypassing many urdlesElectric cars ave )e7er parts./0 as t e 9attery tec nologySelling in C ina, A)rica, & Sout America

Hybrid Car ideo 3!+

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BYD Electric Vehicles

at are t eir c ances o) success<arren .u))et invested )or => e?uity *%%Stic4er price al) t at o) a C evy @olt*%% 5any o9stacles are a ead

ic PES'E# )actors 7ill 9e most important )orelectric ve icles in t e " st century<

./0 7as C ina s )astest%gro7ing carma4er

Sold more t an ==,=== cars in "= =

S ang ai government su9sidy )or E@s

3!

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PESTEL Framework

PoliticalGovernment pressuresSu9sidies and incentives0i))erences in countries,states, and regions

EconomicGro7t ratesInterest ratesEmployment levelsCurrency exc ange

Sociocultural8orms, culture, values0emograp ics#i)estyle c anges

'ec nologicalInnovation0i))usionBesearc & development

EnvironmentalGlo9al 7armingSustaina9ilityPollution

#egalCourt system#egislation6iring la7s

3!-

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E 6I.I' 3* The Firm Embedded in Its ExternalEnvironment

3!D

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!

S'BA'EG/ 6IG6#IG6' 3* UBS elents to Press!reb" U#S# $overnment

#arge S7iss 9an4 in trou9le;*S* government accused .S o) aiding in tax evasion

.illions o) dollars moved o))s ore

8ames o) ",=== *S* citi(ens soug t

Eventually over +,+ = names 7ere released

Imperils S7iss .an4 secrecy

6istorically, a competitive advantage

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#$ 3% Apply the PESTE* model to or$ani+e and assess the impact ofexternal forces on the firm#$ 3%" Apply t e structure%conduct%per)ormance 1SCP2 model to

explain t e e))ect o) industry structure on )irm pro)ita9ility*#$ 3%3 Apply the fi!e forces model to understand the profit potential of the

firm"s industry#$ 3%+ #escribe the strate$ic role of complements in creatin$ positi!e-

sum co-opetition#$ 3% %nderstand the role of industry dynamics and industry

con!er$ence in shapin$ the firm"s external en!ironment#$ 3%- Apply the strate$ic $roup model to re!eal performance differences

bet&een clusters of firms in the same industry

3!

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E 6I.I' 3*" Ind!str" Str!ct!res alon% the&ontin!!m

,an .li$opolies ideo

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E'cient (arkets

The efficient mar et hypothesis/ in financial mar ets/ is onein &hich prices reflect information instantaneously and onein &hich extra-ordinary profit opportunities are thus rapidlydissipated by the action of profit-see in$ indi!iduals in themar et

Ho& &ell does the efficient mar et hypothesis for capitalmar ets apply to product mar4ets<

0f the efficient mar et hypothesis applied fully to productmar ets then &e should see o!er time e1uali+ation in ris -ad2usted rates of return across industries

at do t e data support<3!

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123 4556 7ara *ederman/ Rotman School of 7ana$ement

5

85

45

'5

95

65

:5

;5

<5

=5

855

4 >

9 >

: >

< >

8 5 >

8 4 >

8 9 >

8 : >

8 < >

4 5 >

4 4 >

4 9 >

4 : >

4 < >

' 5 >

' 4 >

A!era$e Return on E1uity in %S 0ndustries/ 8=<4-8=='

8um9er o)

Industries

?irst @uartile A!era$e

44 4>

?ourth @uartile A!era$e

= '>

oteB Return on E1uity et 0ncome D ear End Shareholders" E1uityF Analysis based on sample of 6=' industriesSourceB Sil!erman 4555

Average +*D>5edian 3* >

*D >

3 * E >

- * , >

Beturn on E?uity 1Percent2

#ifferences in Profitability Across 0ndustries

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13

Some Ind!stries )re (ore Pro*tableSome Ind!stries )re (ore Pro*tableThan +thersThan +thers

R.E G R.A - Selected 0ndustries/ 8=<=

5>

6>

85>

86>

45>

46>

'5>

Pharmaceuticals Tires D Rubber Home Appliances

R.ER.A

3 4556 7ara *ederman/ Rotman School of 7ana$ement

#ifferences in Profitability Across Selected 0ndustries

-6 5 6 85 86 45 46

Scheduled air transport

Cable tele!ision ser!ice

En$ineerin$ ser!ices

Race trac operations

#ru$ stores

#ental e1uipment

Semiconductors

Pharmaceuticals

$perating income H assets, FEE%F 1>2

SourceB Pan a2 hema&at and Ian J Ri! in/ KCreatin$ Competiti!e Ad!anta$eL

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14

,ithin Ind!stries- Some &om.etitors Per/orm,ithin Ind!stries- Some &om.etitors Per/ormBetter than +thers#Better than +thers#

B$E % P armaceutical Industry

5>

85>

45>

'5>

95>

65>

:5>

Am$en A5P Eli *illy 5erc4 7ylan Pfi+er

3 4556 7ara *ederman/ Rotman School of 7ana$ement

#ifferences in Profitability Jithin Selected 0ndustries

Semiconductor Industry

-6 5 6 85 86 45 46

ational Semiconductor

Analo$ #e!ices

A7#

7otorola

Texas 0nstruments

0ntel

.peratin$ income D assets/ 8=<<-=6 (>)

SourceB Pan a2 hema&at and Ian J Ri! in/ KCreatin$ Competiti!e Ad!anta$eL

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155-22Copyright ©2005 by The McGraw-Hill Companies, Inc. ll rights reser!e".

The % S Auto 0ndustry"s Profit Pool

Exhibit 5.7 The U.S. Auto Industry’s Profit Pool

Source: Adapted by per ission of !ar"ard #usiness $e"ie%. Exhibit fro &A 'resh (oo) at Strate*y+ by ,. -adieshand . (. -ilbert/ Harvard Business Review 70/ no. 1 2344 6/ pp. 314 8 . 9opyri*ht 344 by the !ar"ard #usinessSchool Publishin* 9orporation/ all ri*hts reser"ed.

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163 4556 7ara *ederman/ Rotman School of 7ana$ement

#ecomposition of ariance in Profitability

/ear "> IndustryE>

Corporateparent

+>

.usiness

segment3=>

'ransient+->

SourceB Anita 7 7c ahan and 7ichael E Porter/ KHo& 7uch #oes 0ndustry 7atter Really? L Strategic Management Journal, 8==;

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17

Three Factors Determinin% &om.an"Per/ormance

Industry Contexte $ / durin$ the last t&o decades/ companies in theairlines industry ha!e been persistently less profitablethan those in the pharmaceutical industry

8ational Contexte $ / &orld"s most successful consumer electronics firmsare in Iapan

Company Capa9ilities and Strategiese $ / Jal-mart and South&est Airlines

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18

Structure-Conduct-PerformanceStructure-Conduct-Performance

Industry Structure• Number of buyers

and sellers• Degree of productdierentiation

• Barriers to entry• Cost structures• Vertical integration• Alliances

Industr y Structure• Number of buyers

and sellers• Degree of productdierentiation

• Barriers to entry• Cost structures• Vertical integration• Alliances

irm Conduct• Pricing

• Ad!ertising• "#D• In!estment in

plant ande$uipment

irm Conduct• Pricing

• Ad!ertising• "#D• In!estment in

plant ande$uipment

Performance• %con pro&ts

• Accountingpro&ts 'ratios(

• NPV)DC

• *VA)%VA• +obin,s

Performance• %con pro&ts

• Accountingpro&ts 'ratios(

• NPV)DC

• *VA)%VA• +obin,s

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19

Clarke Modifications of Baye Chapter 7 4

The Structure-Conduct-Performance Paradigm

; The 9ausal <ie%=ar)et

Structure9onduct Perfor ance

The Feedback Criti ue!o one-"ay causal link#Conduct can affect market structure#Market performance can affect

conduct as "ell as market structure#

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#$ 3% Apply the PESTE* model to or$ani+e and assess the impact ofexternal forces on the firm#$ 3%" Apply the structure-conduct-performance (SCP) model to explain

the effect of industry structure on firm profitability

#$ 3%3 Apply t e )ive )orces model to understand t e pro)it potentialo) t e )irm s industry*

#$ 3%+ #escribe the strate$ic role of complements in creatin$ positi!e-sum co-opetition

#$ 3% %nderstand the role of industry dynamics and industrycon!er$ence in shapin$ the firm"s external en!ironment

#$ 3%- Apply the strate$ic $roup model to re!eal performance differencesbet&een clusters of firms in the same industry

3!"=

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E 6I.I' 3*3 Porter0s Five Forces (odel

SourceB Porter/ =. E. 2>?? 6/ &The fi"e co petiti"e forces that shape strate*y/+ Harvard Business Review

6 forces !ideo- 7 Porter

3!""

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Barriers To Entr"

The free entry and free exit assumption that &or sreasonably &ell for describin$ financial mar ets seemsto be a premise that strays so far from our &orld ofexperience that the assumption impedes our

understandin$ of real-&orld product competition

Thus/ empirical e!idence su$$eststhat (ris -ad2usted) R.E does

.T e1uali+e in the lon$ run

3!"3

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) Taxonom" o/ Barriers to Entr"

'.( Economies o) Scale

Product%speci)ic economies o) scale

*o&er setup costs as a percenta$e of total costs7ore speciali+ed machinery and toolin$ (e $ / Honda)

Plant%speci)ic economies o) scale

En$ineers" 4D' ruleB Since the area of a sphere or cylinder !ariesas t&o-thirds po&er of !olume/ the cost of constructin$ processindustry plants can be expected to rise as t&o thirds po&er oftheir output capacity (This rule applies to petroleum refinin$/cement ma in$/ iron ore reduction and steel con!ersion)

Also Keconomies of massed reser!esL 3!"+

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26

Exam.les o/ Economies o/ Sco.e

Aircra)t B Common &in$/ nose/ and tail components allo&

se!eral models to be le!era$ed usin$ different numbers offusela$e modules to create aircraft of different len$ths andpassen$er capacities by ,oein$ and Airbus 0ndustries

Automo9iles : The Taurus platform &as le!era$ed to

pro!ide the basis for Taurus sedans and mini!ans

Consumer Electronics : .!er 8:5 !ariations of the SonyJal man &ere le!era$ed by Kmixin$ and matchin$L modularcomponents in a fe& basic system desi$ns (K*e$osL)

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) Taxonom" o/ Barriers to Entr"

(4) Experience Curve Advantages

7ar!in *ieberman/ a mana$ement professor at%C*A/ found that in the chemical industry/

on a!era$e/ each doublin$ of plant scaleo!er time &as accomplished by an >reduction in unit costs Thus/ there is an

> learning curve*J

( oteB The mere presence of an experience cur!edoes not insure an entry barrier Another criticalprere1uisite is that the experience be ept proprietary/and not be made a!ailable to competitors and potentialentrants )

3!"D

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) Taxonom" o/ Barriers to Entr"

(') Intended Excess Capacity

,uildin$ extra capacity for the intendedpurpose of deterrin$ entrants fromenterin$ the industry

( oteB potential free-rider problems)

Excess capacity deters entry by increasin$the credibility of price cuttin$ as an entryresponse by incumbents (exB #upont in theproduction of Titanium #ioxide for paint)

InnocentJ excess capacity B#emand is cyclicalF #emand falls short of

expectationsF #emand is expected to $ro&3!"

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) Taxonom" o/ Barriers to Entr"

(9) Beputation

A history of incumbent firms reactin$a$$ressi!ely to entrants may play a rolein current mar et interactions

(6) Product 0i))erentiation

,rand identification and customer loyaltyto incumbent products may be a barrierto potential entrants (e $ / Coca-Cola)Product differentiation appears to be animportant entry barrier in the mar et foro!er-the counter dru$s and in thebre&in$ industry 3!"

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) Taxonom" o/ Barriers to Entr"

(:) Capital Be?uirements

(;) 6ig S7itc ing Costso) .uyers

E $ / chan$in$ may re1uireemployee retrainin$

(e $ / 0 solutions/ andcomputer soft&are)

3!3=

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) Taxonom" o/ Barriers To Entr"

((<) Access to 0istri9ution C annelsThe manufacturer of a ne& food product/for example/ must persuade the retailer to$i!e it space on the fiercely competiti!esupermar et shelf !ia promises ofpromotion/ and intense sellin$ efforts toretailers

(=) Favora9le Access to Ba7 5aterials

and to 5ar4etsAlcoa %%K 9auxiteExclusi!e dealin$ arran$ements?a!orable $eo$raphic locations

3!3

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) Taxonom" o/ Barriers To Entr"

(85) Proprietary 'ec nology

Product no& ho&*o& cost product desi$n

Patents (and other $o!ernment restrictions)

(88) Exit 9arriers 1o) incum9ents2 can 9eentry 9arriers 1to potential entrants2

3!3"

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) Taxonom" o/ Barriers To Entr"

6ig exit costs:

Hi$h exo$enous and endo$enous sunk costs(not 2ust hi$h fixed costs )

Hi$h asset specificityHi$hly illi1uid assets*o& sal!a$e !alue if exit occursHi$h s&itchin$ costs

*o& mobility of assetsCredible commitments0rre!ersible in!estment

e*g*, Alas4an pipeline 9uilt in DD at a cost o) L = 9illion

3!33

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Power o/ S!..liers 1 2I$2 IF3

0ominated 9y a )e7

companies8o su9stitutes )or supplierproducts

Suppliers products aredi))erentiated

Incum9ents )ace igs7itc ing costs

Product is important inputto 9uyer

For7ard Integration is acredi9le t reat

3!3+

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Power o/ B!"ers 1 2I$2 IF3

A )e7 large 9uyers

1potential collusion2#arge 9uyers relative to a seller1e*g*, 65$ po7er 9uyingp armaceuticals2

Products are standardi(ed andundi))erentiated

.uyers )ace )e7 s7itc ing costs

6ig s7itc ing costs )or sellers

.ac47ard Integration is credi9le19uyer as )ull in)ormation2

3!3

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Threat o/ S!bstit!tes 1 2I$2 IF3

Su9stitute is good price%per)ormance trade%o))

.uyers s7itc ing costs tosu9stitute is lo7

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Inc!mbent ivalr"1 2I$2 IF3

5any competitors in t e industry

1industry concentration is lo72Firms are o) e?ual si(e

Industry gro7t is slo7 or s rin4ing 1over%capacity is ig 2

Exit 9arriers are igContractual o9ligationsGeograp ic or istorical attac ments

Products and services are direct su9stitutes1product di))erentiation is lo72

3!3D

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De%ree o/ ivalr"

Ad!ertisin$ battles/ on theother hand/ may &ell expand

or enhance the le!el of

product differentiation in theindustry for the benefit ofall firms

0n other &ords/ ad!ertisin$ isnot necessarily a K+ero-sumL$ame

3!3

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The Uses o/ Ind!str" )nal"sis

Static Analysis %Ho& do &e explain current ri!alry and profitabilityQ

0ynamic Analysis %Jhere is the industry Headed 0nli ely to be in the futureQ

3!3

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Ind!stries Evolve over Time as the elationshi.sBetween the Five Forces &han%e

0ynamic %Forces Analysis

time

" e m a n "

3!+=

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#$ 3% Apply the PESTE* model to or$ani+e and assess the impact ofexternal forces on the firm

#$ 3%" Apply the structure-conduct-performance (SCP) model to explainthe effect of industry structure on firm profitability

#$ 3%3 Apply the fi!e forces model to understand the profit potential of thefirm"s industry

#$ 3%+ 0escri9e t e strategic role o) complements in creatingpositive%sum co%opetition*

#$ 3% nderstand t e role o) industry dynamics and industry

convergence in s aping t e )irm s external environment*#$ 3%- Apply the strate$ic $roup model to re!eal performance differences

bet&een clusters of firms in the same industry

3!+

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42

S PP#IEBS

P$'E8'IA#E8'BA8'S

S .S'I' 'ES

. /EBS

I80 S'B/C$5PE'I'$BS

Bivalry amongexisting )irms

.argaining po7er o) suppliers

.argaining po7er o) 9uyers

' reat o)

ne7 entrants' reat o)

su9stitutes

C$5P#E5E8'S

' e suppliers o)

complements createvalue )or t e industryand can exercise9argaining po7er

Five Forces or Six< Introducing ComplementsFive Forces or Six< Introducing Complements

S!bstit!tes and &om lements

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S!bstit!tes and &om.lementsSubstituteB An alternati!e from outside the given industry for its product or ser!ice Jhen its performance

increases or its price falls/ industry demand decreases *Plastic !s aluminium containersideo conference !s business tra!el

ComplementB A product or ser!ice or competency thatadds !alue to ori$inal product Jhen its performanceincreases or its price falls/ industry demand increases

Paper for erox copiers

iTunes for iPod music players

Complementor B0f customers !alue your product more&hen combined &ith another firm"s product or ser!ice

7ichelin tires for ?ord G 7 3!+3

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E 6I I' 3* D t i i % I d! t "

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E 6I.I' 3* Determinin% Ind!str")ttractiveness

3!+

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Strate%ic $ro!.s

5o9ility .arrier 0imensions 'o Consider:

Product MualityBa7 materialsSpeci)ications

Features0ura9ility

Cost Position

Economies o) scale and scope

@ertical Integration.ac47ard andHor )or7ard

Exclusive contracts and in% ouse service net7or4s 3!+

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Strate%ic $ro!.s

5apping GroupsAuto industry example

G5, Ford, 'oyota ! gas./0, 'esla ! electric

I0 9est dimensionsC oose t7o )or map#ocate )irms on map

.u99le si(e mar4et s are

Bivalry is strongest int e same groupSome groups are morepro)ita9le t an ot ers

5o9ility .arriersFirms 7ould try tomove to t e pro)itspots . ';

Speci)ic )actors t atseparate groups

AirlinesInternational routesBegulations: airportslots

3!+

E 6I I' 3*D St t %i $ ! d ( bilit" B i 1 U#S#

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E 6I.I' 3*D Strate%ic $ro!.s and (obilit" Barrier 1 U#S#)irlines

3! =

Em irical Testin% o/ Str!ct!re4&ond!ct 5Strate%"64

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Em.irical Testin% o/ Str!ct!re4&ond!ct 5Strate% 64Per/ormance

R.E (2) 89 ; N 565 CR9 (2) N 88= CAPDS (2) N

(4 5<) (8 =<)

8 '5 ADS(2) N8 95 RG#DS (2) N5 4: R.J (2) (; 45) (4 =6) (4 =5)

t-statistics in parentheses R-s1uared 9'

CR9 9-firm concentration R.E return on e1uityRG#DS RG#DSales ADS ad!ertisin$DsalesCAPDS capital expendituresDSales R.J demand $ro&th

3!

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Em.irical Testin% o/ Str!ct!re4&ond!ct 5Strate%"64Per/ormance

• 5odel Speci)ication

7ultiple re$ression analysis see s to e!aluate thede$rees to &hich de!iations of the dependent !ariable

(and in this course our focus has been on profit rates asthe dependent !ariable) from its mean are Kexplained byLor associated &ith !ariations in each of a set ofindependent or explanatory !ariables (e $ /

concentration/ barriers to entry/ demand/ etc )

3! 3

Em irical Testin% o/ Str!ct!re4&ond!ct 5Strate%"64

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Em.irical Testin% o/ Str!ct!re4&ond!ct 5Strate% 64Per/ormance

• 5odel Speci)ication

The nature of this association is captured by re$ressioncoefficients relatin$ the profit rates in the industry ofeach independent !ariable/ allo&in$ us to determine theeffect/ for example/ of a 85> increase in sellerconcentration on profit rates/ holdin$ all otherexplanatory !ariables constant (i e / Kceteris paribusL)

3! +

Em irical Testin% o/ Str!ct!re4&ond!ct 5Strate%"64

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Em.irical Testin% o/ Str!ct!re4&ond!ct 5Strate% 64Per/ormance

5odel Speci)ication

@aria9le Predicted Sign Beason

CR9 N Hi$her concentration enables hi$herprices

CAPDS N Capital-cost barrier to entry

ADS N Ad!ertisin$ intensity as a productdifferentiation barrier to entry

RG#DS N Technolo$ical no&-ho&

R.J N #emand $ro&th leads to less li elyprice &ars

Structure-Conduct-PerformanceStructure-Conduct-Performance

Industry Structure• Number of buyers

and sellers• Degree of product

dierentiation• Barriers to entry• Cost structures• Vertical integration• Alliances

Industry Structure• Number of buyers

and sellers• Degree of product

dierentiation• Barriers to entry• Cost structures• Vertical integration• Alliances

irm Conduct• Pricing• Ad!ertising• "#D• In!estment in

plant ande$uipment

irm Conduct• Pricing• Ad!ertising•"#D• In!estment in

plant ande$uipment

Performance• %con pro&ts• Accounting

pro&ts 'ratios(

• NPV)DC

• *VA)%VA• +obin,s

Performance• %con pro&ts• Accounting

pro&ts 'ratios(

• NPV)DC

• *VA)%VA• +obin,s

3!

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• 5odel Speci)ication

ote that the multiple re$ression results are consistent7it (but do not pro!e ) the structure-conduct-performancemodel

As you probably are a&are from your statistics classes/there are many potential problems that can interfere &iththe reliable estimation of re$ression models/ leadin$ to

incorrect inference about the statistical significance andeconomic importance of explanatory !ariables

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' ree Potential Pro9lems B

(8) 7is-specification problemsF

(4) 7easurement problemsF and

(') 0dentification problems

3! D

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(8) 5is%speci)ication Pro9lems B

0mportant ariables .mitted 0n our re$ression/ the impactof substitute products/ and the po&er of buyers andsuppliers ha!e not been included in the model specification

0rrele!ant ariables 0ncluded 0f you belie!e in Kperfectcapital mar etsL then you may 1uestion the idea of capitalcost entry barriers and therefore you &ould 1uestion theinclusion of the independent !ariable CAPDS in the model

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'.('.( 5is%speci)ication Pro9lems:

7odel assumes a linear relationship . Since the re$ressionassumes a linear relationship/ this may turn out to be a poorapproximation if some of the explanatory !ariables (e $ / A# DS)influence the dependent !ariable (i e / R.E) in a non-linear &ay

0ndependent !ariable may not be truly independent?or example/ not only can increased concentration

affect profit rates but profit rates may affectindustry concentration

7ulticollinearity 0f independent !ariables such as(A# DS) and VRG#DS) are hi$hly correlated/ then the

!alidity of the t-statistics come into 1uestion

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(4)(4) 5easurement Pro9lems:

?or example/ CR9 may not be the best measure ofindustry concentration/ &here the HH0 is a bettermeasure Perhaps some performance measure otherthan R.E &ould also be better for testin$ the theory

oteB 0f the e!idence is not consistent &ith the theory it is

not necessarily the case that &e abandon the theory .neof the many possibilities is that &e do not ha!e $oodmeasures of the theoretical concepts

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132132 Identi)ication Pro9lems:

%These problems are related to the idea thatKcorrelation does not imply causality L

?or example/ you mi$ht maintain that hi$had!ertisin$Dsales is a barrier to entry (productdifferentiation) strate$y that causes hi$h profit rates

The re$ression is consistent &ith Porter"s (8=<5) theory

3%-

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13132 Identi)ication Pro9lems

/o0e!er1 you mig2t argue instead t2at 2ig2 pro&trates allo0 more discretionary spending inmar3eting and t2us1 2ig2 pro&t rates ca#se 2ig2

ad!ertising)sales4 +2e empirical e!idence is alsoconsistent 0it2 t2is t2eory4 +2us1 0e 2a!e an5identi&cation problem46 +2e data are consistent0it2 multiple t2eories and 0e must &nd morere&ned tests and better econometric met2ods inorder to ad!ance our scienti&c 3no0ledge instrategic management4