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Rank friction: an ordinal approach to persistent profitability

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  • Thomas C. Powell
  • Ingo Reinhardt

Abstract

We present an ordinal method for studying persistence in firm profitability. The method is based on the degree of stability in a ranked performance distribution over time. The method gives a numerical index of rank friction (Rf) that can be applied to any ranked data over any period of time. Rf is nonparametric and can be used to test theoretical assumptions in strategic management. We illustrate the method in an empirical study of 40 years of profit data in 12 industries. Copyright © 2010 John Wiley & Sons, Ltd.

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  • Thomas C. Powell & Ingo Reinhardt, 2010. "Rank friction: an ordinal approach to persistent profitability," Strategic Management Journal, Wiley Blackwell, vol. 31(11), pages 1244-1255, November.
    • Handle: RePEc:bla:stratm:v:31:y:2010:i:11:p:1244-1255
    DOI: 10.1002/smj.871
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    Cited by:

    1. Victor Manuel Bennett, 2020. "Changes in persistence of performance over time," Strategic Management Journal, Wiley Blackwell, vol. 41(10), pages 1745-1769, October.
    2. Tammy L. Madsen & Michael J. Leiblein, 2015. "What Factors Affect the Persistence of an Innovation Advantage?," Journal of Management Studies, Wiley Blackwell, vol. 52(8), pages 1097-1127, December.
    3. Luís Cabral & Gabriel Natividad, 2016. "Box-Office Demand: The Importance of Being #1," Journal of Industrial Economics, Wiley Blackwell, vol. 64(2), pages 277-294, June.
    4. Schneck, Stefan, 2018. "Times are a changin'? The emergence of new firms and rank persistence," Working Papers 01/18, Institut für Mittelstandsforschung (IfM) Bonn.
    5. Tammy L. Madsen & Gordon Walker, 2017. "Competitive heterogeneity, cohorts, and persistent advantage," Strategic Management Journal, Wiley Blackwell, vol. 38(2), pages 184-202, February.

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