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Using the SHAPLEY value approach to variance decomposition in strategy research: Diversification, internationalization, and corporate group effects on affiliate profitability
- Source :
- Strategic Management Journal. 42:608-623
- Publication Year :
- 2020
- Publisher :
- Wiley, 2020.
-
Abstract
- Research Summary: Variance decomposition methods allow strategy scholars to identify key sources of heterogeneity in firm performance. However, most extant approaches produce estimates that depend on the order in which sources are considered, the ways they are nested, and which sources are treated as fixed or random effects. In this paper, we propose the use of an axiomatically justified, unique, and effective solution to this limitation: the “Shapley Value” approach. We show its effectiveness compared to extant methods using both simulated and real data, and use it to explore how the importance of business group effects varies with group diversification and internationalization in a large, representative sample of European firms. We thus demonstrate the method's superior accuracy and its usefulness in asking and answering new questions. Managerial Summary: A key contribution of strategic management research to managerial practice is identifying drivers of firm performance that operate at firm, corporation, industry, and national levels. A branch of this research measures the relative importance of factors at these different levels in producing variation in firm performance, thus helping top managers focus efforts on aspects of their businesses most likely to yield performance differences. However, estimates produced by extant methods are sensitive to method used, and to modeling choices made. This paper proposes the use of the “Shapley Value” approach, which is free from such sensitivity, shows its effectiveness compared to extant methods, and uses it to explore how the importance of factors at the level of the business group varies with group diversification and internationalization.
- Subjects :
- diversification
Strategy and Management
Social Sciences
Diversification (marketing strategy)
INDUSTRY
RELATIVE IMPORTANCE
MARKETS
Microeconomics
Corporate group
Business & Economics
Shapley value regression
0502 economics and business
Economics
Business
Business and International Management
PREDICTORS
1505 Marketing
COORDINATION COSTS
050208 finance
COMPONENTS
05 social sciences
BUSINESS SEGMENT PERFORMANCE
Random effects model
Shapley value
35 Commerce, Management, Tourism and Services
Management
corporate group
Internationalization
Business & Management
SUBNATIONAL REGION MATTER
DOMINANCE ANALYSIS
1503 Business and Management
Variance decomposition of forecast errors
3507 Strategy, Management and Organisational Behaviour
Strategic management
Profitability index
internationalization
variance decomposition
050203 business & management
FIRM PERFORMANCE
Subjects
Details
- ISSN :
- 10970266 and 01432095
- Volume :
- 42
- Database :
- OpenAIRE
- Journal :
- Strategic Management Journal
- Accession number :
- edsair.doi.dedup.....a3c38ce2625b360c2f6b661705fac64d