How much do strategic groups matter? An empirical investigation

The debate about the drivers of firm performance is central to the fields of strategic management and industrial organization. Much of this debate has focused on determining the relative importance of firm versus industry effects. In contrast, the measurement of the relative importance of strategic groups on firm performace remains largely unexplored. Prior research has found mixed results about the importance of strategic groups as drivers of firm performance but only three studies have tried to quantify it. This paper estimates firm versus group effects within the Belgian electrical wholesale sector. In the line of previous research, our results confirm that firm effects explain most of the variance in the performance variables. The explanatory power of firm effects varies from 55% to 63% while the strategic group effects explain from 6.8% to 9.7% of the variance.