IDEAS home Printed from https://ideas.repec.org/a/bla/agecon/v45y2014is1p53-63.html
   My bibliography  Save this article

Persistence of firm-level profitability in the European dairy processing industry

Author

Listed:
  • Stefan Hirsch
  • Monika Hartmann

Abstract

Based on autoregressive (AR) models and Arellano-Bond dynamic panel estimation, this article analyses profit persistence in the European dairy processing industry. The sample comprises 590 dairy processors from the following five countries: Belgium, France, Italy, Spain, and the United Kingdom. The AR models indicate that cooperatives which account for around 20% of all firms in the dairy processing sector are not primarily profit oriented. In addition, the results point toward a high level of competition as profit persistence is rather low even if cooperatives are excluded. The panel model reveals that short- as well as long-run profit persistence is influenced by firm and industry characteristics.

Suggested Citation

  • Stefan Hirsch & Monika Hartmann, 2014. "Persistence of firm-level profitability in the European dairy processing industry," Agricultural Economics, International Association of Agricultural Economists, vol. 45(S1), pages 53-63, November.
    • Handle: RePEc:bla:agecon:v:45:y:2014:i:s1:p:53-63
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/agec.12129
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. John Cable & Dennis Mueller, 2008. "Testing for Persistence of Profits' Differences Across Firms," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(2), pages 201-228.
    2. Anita M. McGahan & Michael E. Porter, 1999. "The Persistence of Shocks to Profitability," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 143-153, February.
    3. Geroski, Paul A & Jacquemin, Alexis, 1988. "The Persistence of Profits: A European Comparison," Economic Journal, Royal Economic Society, vol. 98(391), pages 375-389, June.
    4. Dorsey, Sarah & Boland, Michael A., 2009. "The Impact of Integration Strategies on Food Business Firm Value," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 41(3), pages 1-14, December.
    5. Jan Schiefer & Stefan Hirsch & Monika Hartmann & Adelina Gschwandtner, 2013. "Industry, firm, year and country effects on profitability in EU food processing," Studies in Economics 1309, School of Economics, University of Kent.
    6. Rafat Soboh & Alfons Oude Lansink & Gert Van Dijk, 2012. "Efficiency of Cooperatives and Investor Owned Firms Revisited," Journal of Agricultural Economics, Wiley Blackwell, vol. 63(1), pages 142-157, February.
    7. Mueller,Dennis C., 2009. "Profits in the Long Run," Cambridge Books, Cambridge University Press, number 9780521101592, January.
    8. Stefan Hirsch & Adelina Gschwandtner, 2013. "Profit persistence in the food industry: evidence from five European countries," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 40(5), pages 741-759, December.
    9. Schmalensee, Richard, 1985. "Do Markets Differ Much?," American Economic Review, American Economic Association, vol. 75(3), pages 341-351, June.
    10. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    11. Anita M. McGahan & Michael E. Porter, 2002. "What Do We Know About Variance in Accounting Profitability?," Management Science, INFORMS, vol. 48(7), pages 834-851, July.
    12. Rajshree Agarwal & Michael Gort, 2002. "Firm and Product Life Cycles and Firm Survival," American Economic Review, American Economic Association, vol. 92(2), pages 184-190, May.
    13. Glen, Jack & Lee, Kevin & Singh, Ajit, 2001. "Persistence of profitability and competition in emerging markets," Economics Letters, Elsevier, vol. 72(2), pages 247-253, August.
    14. Long, William F & Ravenscraft, David J, 1984. "The Misuse of Accounting Rates of Return: Comment," American Economic Review, American Economic Association, vol. 74(3), pages 494-500, June.
    15. Albaek, Svend & Schultz, Christian, 1998. "On the relative advantage of cooperatives," Economics Letters, Elsevier, vol. 59(3), pages 397-401, June.
    16. ANITA M. McGAHAN & MICHAEL E. PORTER, 1997. "How Much Does Industry Matter, Really?," Strategic Management Journal, Wiley Blackwell, vol. 18(S1), pages 15-30, July.
    17. Richard P. Rumelt, 1991. "How much does industry matter?," Strategic Management Journal, Wiley Blackwell, vol. 12(3), pages 167-185, March.
    18. Waring, Geoffrey F, 1996. "Industry Differences in the Persistence of Firm-Specific Returns," American Economic Review, American Economic Association, vol. 86(5), pages 1253-1265, December.
    19. Adelina Gschwandtner, 2005. "Profit persistence in the 'very' long run: evidence from survivors and exiters," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 793-806.
    20. Maruyama, Nobuhiro & Odagiri, Hiroyuki, 2002. "Does the 'persistence of profits' persist?: a study of company profits in Japan, 1964-97," International Journal of Industrial Organization, Elsevier, vol. 20(10), pages 1513-1533, December.
    21. Adelina Gschwandtner & Jesus Crespo Cuaresma, 2013. "Explaining the Persistence of Profits: A Time-Varying Approach," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 20(1), pages 39-55, February.
    22. John Goddard & Manouche Tavakoli & John Wilson, 2005. "Determinants of profitability in European manufacturing and services: evidence from a dynamic panel model," Applied Financial Economics, Taylor & Francis Journals, vol. 15(18), pages 1269-1282.
    23. Adelina Gschwandtner, 2012. "Evolution Of Profit Persistence In The Usa: Evidence From Three Periods," Manchester School, University of Manchester, vol. 80(2), pages 172-209, March.
    24. Goddard, J. A. & Wilson, J. O. S., 1999. "The persistence of profit: a new empirical interpretation," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 663-687, July.
    25. Novkovic, Sonja, 2008. "Defining the co-operative difference," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(6), pages 2168-2177, December.
    26. Stefan Hirsch & Jan Schiefer & Adelina Gschwandtner & Monika Hartmann, 2014. "The Determinants of Firm Profitability Differences in EU Food Processing," Journal of Agricultural Economics, Wiley Blackwell, vol. 65(3), pages 703-721, September.
    27. Fisher, Franklin M & McGowan, John J, 1983. "On the Misuse of Accounting Rates of Return to Infer Monopoly Profits," American Economic Review, American Economic Association, vol. 73(1), pages 82-97, March.
    28. Levi, Yair & Davis, Peter, 2008. "Cooperatives as the "enfants terribles" of economics: Some implications for the social economy," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(6), pages 2178-2188, December.
    29. B. Burcin Yurtoglu, 2004. "Persistence of firm-level profitability in Turkey," Applied Economics, Taylor & Francis Journals, vol. 36(6), pages 615-625.
    30. Schiefer, Jan & Hartmann, Monika, 2013. "Industry, firm, year, and country effects on profitability in EU food processing," Discussion Papers 162878, University of Bonn, Institute for Food and Resource Economics.
    31. Ollinger, Michael & MacDonald, James, 2000. "Poultry Plants Lowering Production Costs and Increasing Variety," Food Review/ National Food Review, United States Department of Agriculture, Economic Research Service, vol. 23(2), pages 1-6.
    32. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    33. John Cable & Richard Jackson, 2008. "The Persistence of Profits in the Long Run: A New Approach," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(2), pages 229-244.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stefan Hirsch, 2018. "Successful In The Long Run: A Meta†Regression Analysis Of Persistent Firm Profits," Journal of Economic Surveys, Wiley Blackwell, vol. 32(1), pages 23-49, February.
    2. Stefan Hirsch & Jan Schiefer, 2016. "What Causes Firm Profitability Variation in the EU Food Industry? A Redux of Classical Approaches of Variance Decomposition," Agribusiness, John Wiley & Sons, Ltd., vol. 32(1), pages 79-92, January.
    3. Johan E. Eklund & Emma Lappi, 2019. "Persistence of profits in the EU: how competitive are EU member countries?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(2), pages 327-351, May.
    4. Jan Schiefer & Stefan Hirsch & Monika Hartmann & Adelina Gschwandtner, 2013. "Industry, firm, year and country effects on profitability in EU food processing," Studies in Economics 1309, School of Economics, University of Kent.
    5. Adelina Gschwandtner & Stefan Hirsch, 2018. "What Drives Firm Profitability? A Comparison of the US and EU Food Processing Industry," Manchester School, University of Manchester, vol. 86(3), pages 390-416, June.
    6. Stefan Hirsch & David Lanter & Robert Finger, 2021. "Profitability and profit persistence in EU food retailing: Differences between top competitors and fringe firms," Agribusiness, John Wiley & Sons, Ltd., vol. 37(2), pages 235-263, April.
    7. Lanter, David & Hirsch, Stefan & Finger, Robert, 2018. "Profitability and Competition in EU Food Retailing," 2018 Annual Meeting, August 5-7, Washington, D.C. 274202, Agricultural and Applied Economics Association.
    8. Fabio R. Chaddad & Mario P. Mondelli, 2013. "Sources of Firm Performance Differences in the US Food Economy," Journal of Agricultural Economics, Wiley Blackwell, vol. 64(2), pages 382-404, June.
    9. Hernan Etiennot & Roberto Vassolo & Francisco Diaz Hermelo & Anita McGahan, 2019. "How do industry and country impact firm performance? A national and supranational analysis," Review of Managerial Science, Springer, vol. 13(4), pages 791-821, August.
    10. Johan E. Eklund & Emma Lappi, 2018. "Product regulations and persistence of profits: OECD evidence," Journal of Regulatory Economics, Springer, vol. 54(2), pages 147-164, October.
    11. Zouaghi, Ferdaous & Hirsch, Stefan & Garcia, Mercedes Sanchez, 2016. "What Drives Firm Profitability? A Multilevel Approach To The Spanish Agri-Food Sector," 56th Annual Conference, Bonn, Germany, September 28-30, 2016 244762, German Association of Agricultural Economists (GEWISOLA).
    12. Stefan Hirsch & Adelina Gschwandtner, 2013. "Profit persistence in the food industry: evidence from five European countries," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 40(5), pages 741-759, December.
    13. Sameeksha Desai & Johan E. Eklund & Emma Lappi, 2020. "Entry Regulation and Persistence of Profits in Incumbent Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 537-558, November.
    14. Juan Carlos Bou & Albert Satorra, 2003. "The persistence of abnormal returns at industry and firm levels," Economics Working Papers 729, Department of Economics and Business, Universitat Pompeu Fabra.
    15. John Goddard & David McMillan & John Wilson, 2006. "Do firm sizes and profit rates converge? Evidence on Gibrat's Law and the persistence of profits in the long run," Applied Economics, Taylor & Francis Journals, vol. 38(3), pages 267-278.
    16. Goddard, John & Tavakoli, Manouche & Wilson, John O.S., 2009. "Sources of variation in firm profitability and growth," Journal of Business Research, Elsevier, vol. 62(4), pages 495-508, April.
    17. Canarella, Giorgio & Miller, Stephen M. & Nourayi, Mahmoud M., 2013. "Firm profitability: Mean-reverting or random-walk behavior?," Journal of Economics and Business, Elsevier, vol. 66(C), pages 76-97.
    18. J. Vineesh Prakash & D. K. Nauriyal, 2020. "Automotive Components Industry and Profitability Factors: Evidence from India," Vision, , vol. 25(2), pages 209-223, June.
    19. Jesus Crespo Cuaresma & Adelina Gschwandtner, 2006. "The competitive environment hypothesis revisited: non-linearity, nonstationarity and profit persistence," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 465-472.
    20. Christa Sys, 2013. "Persistence of profits in the container liner shipping industry," Chapters, in: Thomas Vanoutrive & Ann Verhetsel (ed.), Smart Transport Networks, chapter 6, pages 99-125, Edward Elgar Publishing.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:agecon:v:45:y:2014:i:s1:p:53-63. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/iaaeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.