Is performance driven by industry effects or firm effects? – An empirical research on the listed companies in China by variance components analysis

In the strategic management theory, the structure-based view holds that the structural characteristic of industry is the main determinant of firm performance; while the resource-based view claims that the competitive advantage is driven by firm's resource and capacity. In this paper, the authors carry out an empirical research on 1070 listed companies' performance in 20 industries by variance components analysis; the findings are different from previous researches: in China, the industry factors have notable effect on short-term payoff of the listed companies; industry effects are the main determinants of short-term payoff, but firms' resource and capacities are the dominant determinants of firm values and development potential; the performance of firms in the middle level of the industry are mainly caused by industry effects, but the performance of firms, which are performance leaders and losers in the industry are mainly caused by firms' resources and capacities.