How Much Does Country Matter?

Industrial organization economics and resource-based views of the firm have disagreed over what matters most to profitability for more than 60 years. Until recent variance decomposition studies started trying to determine the relative importance of industry, corporate parent, and business segment on profitability, little research had been done to investigate the extent to which difference in countries could explain the variation in industry performance. This study explores variation in high-tech industry performance, with particular interest in the relative effects of country versus industry for four country classes and eight geographic regions. A variance components model revealed that while country dominated high-tech industry performance in the developed countries and geographic regions North America, South America, All America, Western Europe, and All Europe, industry factors played a role in the development of high-tech industries worldwide. We also found that the effects of industry contributed substantially to the performance of high-tech industry when there was sustainable investment and innovation, especially in newly industrializing economies, large less-developed countries, and Southeast Asia.