Industry and firm level interaction - Implications for profitability

The purpose of this manuscript is to establish whether a firm-industry interaction effect is a codeterminant of firm-level profitability and thus complements the distinct industry and firm effects targeted in previous research. Industry- and firm-specific effects are analyzed on a sample of financial performance data [return on assets (ROA)] including 9809 Danish small- and medium-sized enterprises (SMEs) with 10-499 employees. The results show that a firm-industry interaction effect, not explored by previous authors, is significant as a codeterminant of financial performance. (C) 2003 Elsevier Science Inc. All rights reserved.