An analysis of the factors affecting change in an industry’s profit: The example of the Taiwan cement industry

This study incorporates the productivity changes decomposition method into the profit change decomposition model, in which three main sources of profit change are identified, namely: (1) the productivity change effect, (2) the resource input effect, and (3) the price effect, and applies it to the determination of the relative prominence of various sources of operating profit change in the Taiwanese cement industry during 1994–2001. The analytical results reveal that the main sources of downward pressure on profit change were scale efficiency effect and other input effects, while the main sources of upward pressure were technical change effect and price effect.