effects existed and explained 19% of the variance in rates of return, and market share effects exist but are trivial in magnitude. Schmalensee(1985: 349)says the absence of a corporate effect"merely means that knowing a firm's profitability in market a tells nothing about its likely profitability in a randomly selected market B. His study supports the classical view of industry structure, but provides no details into the characteristics behind these effects Schmalensee's use of vCA to measure importance presents at least two potential methodological problems. First, the management and economics literatures are largely silent on how to interpret VCA. Second, Schmalensee uses the variance of each component rather than the more standard practice of measuring importance with an estimated parameter Intrigued by the non-existence of a corporate effect, Kessides(1987)and Wernerfelt and Montgomery(1988)use similar methods on Schmalensee's data in follow-up studies. Their results agree with Schmalensee's on industry effects, but not on the corporate effect. By excluding corporations with fewer than three business units, Kessides(1987)finds a larger corporate effect than Schmalensee s Using Tobin s q to measure performance and adding diversification focus, Wernerfelt and Montgomery(1988)find a small corporate effect in the form of diversification focus strategies which are measured with a continuous variable Rumelt(1991)respecifies Schmalensee's(1985) model to decompose 1974-1977 FTC line-of-business profitability variance over time using both VCA and ANOVA. Rumelt (1991) adds a different specification of business unit effects(industry corporate interactions),year effects and industry-year interaction effects to Schmalensee's(1985)model. RumeIt's model allows him to identify business- units as an independent effect rather than Schmalensee's method that used market share as a proxy for business-unit effects. Both Schmalensee and rumelt use VCA and ANOVa to estimate their models, but while Schmalensee emphasizes the role of 6