The Moderating Effect of the Sector’s Level of Concentration on the Relationship Between Balance Sheet Composition and the Firm’s Competitive Advantage

Abstract

This paper investigates the relationship between the competitive advantage and balance sheet composition of the firm, based on metrics contained in the structure of financial statements, from endogenous origin (firm's balance sheet composition) or exogenous (level of sector concentration). In addition, we perform tests in order to verify whether the exogenous characteristics moderate the relation between endogenous characteristics and the firm's operational performance. We selected data from the Economatica® database, a Brazilian company specialized in information for the capital market. We based the tests on the hierarchical model approach with repeated measures involving serial and nested regressions, estimated by maximum likelihood. The test results suggest that (i) the firm's idiosyncratic features have greater explanatory capability for the firm's performance than the industry features; (ii) the relation between firm idiosyncratic resources and firm performance are sensitive to industry characteristics.

The Effect of the Positioning Strategy on the Firms' Performance Moderated by the Product Market Competition

“…Kallás (2014) applied regression to fixed and multilevel models with data from 10,903 firms in 64 countries over a period of 23 years and found that the industry concentration has a moderating effect on the relationship between the institutional environment and the performance of firms. Using hierarchical models for the analysis of Brazilian firms, between the years 1996 and 2014, Louzada and Gonçalves (2018) observed that the relationship between the firms' idiosyncratic resources and its operational performance are sensitive to the industry characteristics, and that exogenous factors moderate the relationship between endogenous characteristics and operational performance. Thus, this study directs its investigation to the effect of the industry's level of competition on the positioning strategies and the firms' performance.…”