Sources of superior performance: Industry versus firm effects among firms in Taiwan

No single mainstream approach—neo-liberalism, structural-institutionalism, a flying geese pattern, regional networks, or economic geography—provides adequate explanation of Taiwan's recent economic development. Extending the insights of these important perspectives, this study employs Taiwan's business database to examine external environment, or industry effects, and internal environment, or firm effects, on profitability differentials among firms in Taiwan by using return on assets and the economic performance measures economic value added and market value added. A variance components model is fitted to a new data set, and findings indicate that firm effects dominate performance while industry effects have little impact. The analysis reconciles results with those of previous studies.