Competitiveness and profitability: The case of chemicals, pharmaceuticals and plastics

The purpose of this study is to investigate the relationship between firm level competitiveness, firm profitability and financial factors, in the post crisis period, using a sample of Greek manufacturing firms from three separate sectors, chemicals, pharmaceuticals and plastics using panel data. We employ a binary logit model for competitiveness and an OLS model for profitability, to empirically detect the critical factors affecting competitiveness and profitability in severe depressionary conditions. No prior study has treated the competitiveness and profitability issue for those sectors so far. The findings suggest that profitability plays significant role in firm competitiveness for all examined sectors and size and exports are significant factors of competitiveness. Imports are found to have also a significant effect on competitiveness, because of the quality added to the final products and the high reliance on imports of those industries, however negative for chemicals, due to the cost disadvantage they create and the competitive structure of the sector. The model for profitability, suggests that small firms are the winners and that efficiency of fixed assets and labor are critical for high profit performance for all sectors. R&D is found to play a significant role in the profitability for pharmaceuticals and chemicals, in line with the literature.