Appropriate business strategy for leaders and laggards

Alex Coad*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

27 Citations (Scopus)


We develop a series of hypotheses that predict that the appropriateness of different business strategies is conditional on the firm's relative performance, or distance to the "industry frontier." We use data on three 2-digit high-tech manufacturing industries in the United States over the period 1972-1999, and apply semi-parametric quantile regressions to investigate the contribution of firm behavior to market value at various points of the conditional distribution of Tobin's q. Among our results, we observe that innovative activity, measured in terms of R&D expenditure or patents, has a strong positive association with market value at the upper quantiles (corresponding to the leader firms), whereas the innovative efforts of laggard firms are valued significantly less. Laggard firms, we suggest, should instead achieve productivity growth through efficient exploitation of existing technologies and imitation of industry leaders. Employment growth in leader firms is encouraged, whereas growth of backward firms is not as well received on the stock market.

Original languageEnglish
Pages (from-to)1049-1079
Number of pages31
JournalIndustrial and Corporate Change
Issue number4
Publication statusPublished - 2011 Aug
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics


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