The financial profile of the software industry between 1980 and 1994

The objective of this work is to trace the financial profile of firms in th e software industry between the years 1980-1994 using data from COMPUSTAT. Our results are useful both to academics, who strive to link theory to empi rical observation, and to practitioners trying to better understand the env ironment in which they operate. Our analysis suggests that (1) the software industry has been steadily expanding over the sample period, (2) the relat ive market power of the industry leaders has remained fairly stable, (3) th e median firm operating in the industry has became smaller through time, (4 ) firms have been spending increasingly more on R&D and less in capital inv estment through time, (5) profitability was declining over the first half o f the sample period, stabilizing in the second half, and (6) the risk of ba nkruptcy for the median firm has similarly declined over the sample period. (C) 2000 Elsevier Science B.V. All rights reserved.