Rank friction: an ordinal approach to persistent profitability |
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| Authors: | Thomas C Powell Ingo Reinhardt |
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| Institution: | 1. Said Business School and St. Hugh's College, University of Oxford, Oxford, U.K.;2. University of Cologne, Department of Business Policy and Logistics, Cologne, Germany |
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| Abstract: | We present an ordinal method for studying persistence in firm profitability. The method is based on the degree of stability in a ranked performance distribution over time. The method gives a numerical index of rank friction (Rf) that can be applied to any ranked data over any period of time. Rf is nonparametric and can be used to test theoretical assumptions in strategic management. We illustrate the method in an empirical study of 40 years of profit data in 12 industries. Copyright © 2010 John Wiley & Sons, Ltd. |
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| Keywords: | ranks ordinal persistent profitability competition performance |
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