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What Drives Firm Profitability? A Multilevel Approach To The Spanish Agri-Food Sector

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  • Zouaghi, Ferdaous
  • Hirsch, Stefan
  • Garcia, Mercedes Sanchez

Abstract

Strategic management research has demonstrated the importance of firm resources and industry structure as drivers of profitability. However, less is known about how factors related to firms´ geographical locations affect profitability. In this article, we estimate firm-, industry-, year-, and region-specific effects on agri-food firm profitability in Spain. We apply the multilevel approach of Hierarchical Linear Modeling to a sample of 3,273 agri-food firms operating in different geographical districts during the time span 2006-2013. The results reveal the dominance of firm-specific effects which contribute up to 48.8% to variance in profitability. Moreover, firm size, growth, financial risk as well as innovation activity turn out as significant profit drivers. Although firm-effects have a stronger impact than industry affiliation and location, the results indicate that structural industry factors such as concentration and size as well as territorial factors such as regional education and unemployment influence profitability. Moreover, location in rural districts is not necessarily a handicap for firm profitability.

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  • 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).
    • Handle: RePEc:ags:gewi16:244762
    DOI: 10.22004/ag.econ.244762
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