Strategic Management Journal, Vol. 19, 211-219(1998) FIRM AND INDUSTRY EFFECTS WITHIN STRATEGIC MANAGEMENT: AN EMPIRICAL EXAMINATION ALFREDo J. MAURIand MAX P MICHAELS2 "Baruch College, University of New York, New York, U.S.A Mckinsey Co New York U.s.A his study brings out the complementarities between resource-based and industrial organizati schools within strategic management through an empirical examination of firm and industry effects. A variance component analysis of 264 single-business compa 69 industries using 5-and 15-year periods suggests that firm effects are more important than industry effects on firm performance, but not on core strategies such as technology and marketing. The finding also point to the need to study core strategies at lower levels of aggregation to understand the sources of competitive advantage, o 1998 John Wiley Sons, Ltd Srat.Mgmt.J,vol.19,211-219,1998 INTRODUCTION bert, Phillips, and Westfall, 1996), and eported contradictory findings. None of the Firm effects and industry effects capture the studies has examined the firm effects on strategies degree of heterogeneity within an industry. They though it would help us understand why firms underlie several important concepts in strategic differ'( Carroll, 1993; Nelson, 1991 management such as distinctive competence and This study seeks to bring out the complemen Yet two schools with nificant influence in strategic management have industrial organization through an empirical been at odds with one another regarding the analysis. We estimate the firm and industry magnitude and persistence of firm effects. The effects on core strategies as well as performance dominat anizavo ant an argues that firm heteroge- using a sample of nondiversified companies over neity Is ersistent, whereas indus- 5-year and 15-year periods. The results show the suggests that industry effects predominance of firm effects on performance but not on core strategies such as technology and Not only is there conflicting theoretical guid- marketing ance, but there have also been few empirical studies. These empirical studies have focused on the performance variation among firms and indus- DIFFERENT PERSPECTIVES ON tries(Schmalensee, 1985; Rumelt, 1991; Roque- FIRM AND INDUSTRY EFFECTS Firm effects capture the unique firm character- istics which influence the variation in strategies *Correspondence to: Alfredo J. Mauri, Baruch College, and performance outcomes across industries and f New York, 17 Lexington Ave, New York, firms, and indr ffects refer to attributes *This research was undertaken while the author was a student mon to an industry. The dominance of firm eff suggests heterogeneity because of barriers to CCC0143-2095/98/030211-09$1750 Received 3 May 1995 e 1998 John Wiley Sons, Ltd Final revision received 6 May 1997