Industry versus firm effects on the profit persistence in China

• Based on a large sample of Chinese machinery manufacturing companies
• A research on profit persistence within the period of economic fluctuations
• Results support the hypotheses of RBV in Chinese machinery manufacturing industry.
• The comparative study of existing related papers

Industry structures and the availability and utilization of internal corporate resources are two key determinants of profit persistence. The theories behind industrial organization and the resource-based view of the firm offer different conclusions on which determinant matters most. Based on a large sample of Chinese machinery manufacturing companies listed on the Shanghai and Shenzhen A-share market between 2001 and 2010, the present study analyzes and compares the relative degrees of importance of industry and firm effects on profit persistence. The results indicate that firm effects persist longer than industry effects, therefore supporting the hypotheses of the resource-based view. Studies in this field have used different research subjects, research backgrounds, study periods and criteria for profit partition, factors which contribute to the differences in research results.