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Strategic Organization
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The Emergence and Sustainability of Abnormal Profits

Anita M. McGahan

Boston University, amcgahan{at}bu.edu

Michael E. Porter

Harvard University, mporter{at}hbs.edu

In this paper, we examine the emergence and the sustainability of abnormal profits among businesses that were part of US public corporations between 1981 and 1994 and that reported financial results for at least six years. Our results reveal strong asymmetries between high and low performers. Overall, high performance is more stable than low performance. High performers show profits above the average a decade earlier In contrast, low performers show profits that are slightly above average a decade earlier Industry and corporate-parent effects influence high performance to a far greater degree than low performance. Low performance is dominated by business-specific effects.

Key Words: competition • entrepreneurship • industry • performance • sustainability

Strategic Organization, Vol. 1, No. 1, 79-108 (2003)
DOI: 10.1177/1476127003001001219
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