Firm, industry and corporation effects revisited: A mixed multi-level analysis for Chilean companies. Applied Economic Letters.

Abstract
The relative importance of the corporate, industry and firm effects on business’ performance has been studied profusely in the literature. Until now, little has been said about the nested structure of the problem. The multi-level analysis appears as a good alternative over the approaches used so far to better understand this phenomenon. This paper analyzes the significance of the aforesaid effects for Chilean firms and assesses the impact of various regressors on residual variances. Export intensity of firms and industries proved to have a significant impact on the estimated industry effect, making the industry- related variance statistically not different from zero. However, the industry’s influence did not totally disappear, because the effect of export intensity on firms’ profitability depends on the industry to which the firm belongs. Moreover, firm size turns out to be significant and positively associated to firm ́s return, which can be evidence of economies of scale or more efficient processes as a company grows in size.

Published by:
American Economic Journal: Applied Economic Letters, Volume 18, Issue 1 January 2011, pages 95 – 100.

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