Distance to frontier and appropriate business strategy

Arbeitspapier

This paper is an empirical test of the hypothesis that the appropriateness of different business strategies is conditional on the firm's distance to the industry frontier. We use data on four 2-digit high-tech manufacturing industries in the US over the period 1972-1999, and apply semi-parametric quantile regressions to investigate the contribution of firm behavior to market value at various points of the conditional distribution of Tobin's q. Among our results, we observe that innovative activity, measured in terms of R&D expenditure or patents, has a strong positive association with market value at the upper quantiles (corresponding to the leader firms) whereas the innovative efforts of laggard firms are valued significantly less. Laggard firms, we suggest, should instead achieve productivity growth through efficient exploitation of existing technologies and imitation of industry leaders. Employment growth in leader firms is encouraged whereas growth of backward firms is not as well received on the stock market.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: LEM Working Paper Series ; No. 2008/13

Classification and Topics

• Classification: Wirtschaft ; Firm Performance: Size, Diversification, and Scope ; Business Objectives of the Firm ; Firm Behavior: Theory ; Innovation and Invention: Processes and Incentives
• Subject: Distance to frontier ; Strategy ; Market value ; Innovation ; Firm Growth ; Unternehmenserfolg ; Marktwert ; Betriebsvergleich ; Wettbewerbsstrategie ; Innovationsmanagement ; Imitationsstrategie ; Produktivität ; Unternehmenswachstum ; Hochtechnologie ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Coad, Alex
• Event: Veröffentlichung
• (who): Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM)
• (where): Pisa
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/89321
• Last update: 10.03.2025, 11:46 AM CET