Performance and strategy: simultaneous equations analysis of long-lived firms

Bernadette Power, Gavin C. Reid

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)
161 Downloads (Pure)


A simultaneous equations model of performance, strategy and size is tested using fieldwork evidence on long-lived firms in Scotland. Estimation is by I3SLS, with correction for sample selection bias. The contributions of this paper are that it: (a) grounds estimation on fieldwork evidence; (b) calibrates performance and competitive strategy; (c) tests and models endogeneity; and (d) computes robust trade-off elasticities between firm size and performance. It shows how this trade-off provides the entrepreneur with two strong incentives: (i) to seek greater efficiency typically by an increase in the human capital of the ‘core’ workforce; (ii) to achieve higher levels of performance by adopting more diverse competitive strategies.
Original languageEnglish
Pages (from-to)345-377
Number of pages33
JournalInternational Journal of the Economics of Business
Issue number3
Early online date18 Aug 2015
Publication statusPublished - 2015


  • Performance
  • Size
  • Competitive strategy
  • Simultaneity
  • Mature firms


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