THE IMPORTANCE OF INDUSTRY STRUCTURE FOR THE DETERMINATION OF FIRM PROFITABILITY - A NEO-AUSTRIAN PERSPECTIVE

This paper is concerned with exploring the degree to which industry st ructure determines firm performance. Most of the business policy liter ature follows Porter in arguing that industry structure has an importa nt influence on firm level profit rates. The arguments contained in th is paper take a counter position. It is argued that a plausible altern ative to the hypothesis that industry structure matters is the hypothe sis that (holding demand constant) individual firm differences are the most important determinant of firm profitability.