AN ANALYSIS OF THE MARKET SHARE-PROFITABILITY RELATIONSHIP

A number of researchers in the marketing, management, and economics di sciplines have expressed reservations regarding the validity and gener alizability of the reported relationships between market share and pro fitability. Against this backdrop, the authors performed a meta-analys is on 276 market share-profitability findings from forty-eight studies to address whether market share and profitablity are positively relat ed and to examine the factors that moderate the magnitude of that rela tionship. The authors found that, on average, market share has a posit ive effect on business profitability. However, the magnitude of the ma rket share-profitability relationship is moderated by model specificat ion errors, sample characteristics, and measurement characteristics. T he relationship is moderated the most (and, on average, the relationsh ip could be artifactual) when firm-specific intangible factors are spe cified in the profit model or the estimate of the market share-profita bility relationship is based on an analysis of non-PIMS businesses. Th e authors discuss the implications of these results for the evaluation and utilization of market share information by managers in reference to strategies that focus on building market share as a means for incre asing profits.