February 2003
Other Article
Strategic Organization

The Emergence and Sustainability of Abnormal Profits

By: Michael E. Porter and Anita M. McGahan

Format:Print

Abstract

In this paper, we examine the emergence and the sustainability of abnormal profits among businesses that were part of U.S. public corporations between 1981 and 1994 and that reported financial results for at least six years. Our results reveal strong asymmetries between high and low performers. Overall, high performance is more stable than low performance. High performers show profits above the average a decade earlier. In contrast, low performers show profits that are slightly above average a decade earlier. Industry and corporate-parent effects influence high performance to a far greater degree than low performance. Low performance is dominated by business-specific effects.

Keywords

Strategy; United States

Citation

Porter, Michael E., and Anita M. McGahan. "The Emergence and Sustainability of Abnormal Profits." Strategic Organization 1, no. 1 (February 2003): 79–108.