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 MANAGERIAL AND DECISION ECONOMICS
Manage. Decis. Econ. (2007)
Published online in Wiley InterScience
1 (www.interscience.wiley.com) DOI: 10.1002/mde.1426 1

3
A Model to Evaluate Transient Industry 3

5
Effects 5

7 7
Miguel A. Ariño*, Africa Ariño and Roberto Garcia
9 9
IESE Business School, University of Navarra, Barcelona, Spain
11 11

13 13
In this paper we present a model to evaluate transient industry effects, that is, the impact of

F
15 business cycles on the industry. While the importance of the economic cycle for industry and 15
firm performance is widely recognized, we do not know much about how much the business

O
cycle influences industry activity. The aim of this paper is to present a method that helps to
17 understand the relationship between the business cycle and an industry’s level of 17
activity. Copyright # 2007 John Wiley & Sons, Ltd.

O
19 19

PR
21 21

23 INTRODUCTION method that allows us to evaluate transient industry 23

effects by quantifying the impact that the business
D
25 A number of studies in the strategy field have cycle has on an industry’s level of activity. 25
focused on determining the causes that explain Schmalensee (1985) was the first to estimate the
TE

27 firm performance (Schmalensee, 1985; Hansen and variance components of profit rates in the US 27
Wernerfelt, 1989; Rumelt, 1991; Roquebert et al., Federal Trade Commission Line of Business
29 1996; McGahan and Porter, 1997; Mauri and (FTC LB) data. However, he did not consider 29
EC

Michaels, 1998; Brush et al., 1999; Hawawini
31 et al., 2003). Some of these studies (Rumelt, 1991;
Roquebert et al., 1996; McGahan and Porter,
33 1997; Hawawini et al., 2003) consider the macro-
R
time effects that would capture the influence of the
business cycle as he used one-year data. A number 31
of studies followed that considered transient
industry effects (see Table 1). Rumelt (1991) used 33

economic environment as one of the factors four years of FTC LB data, and included in his
35 driving firm performance, both directly and model both overall business cycle effects and 35
R

indirectly through its interaction with industry transient industry effects, among other relevant
37 effects. These indirect effects}also known as factors. Building on the work by Schmalensee 37
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transient industry effects}have been shown to (1985) and Rumelt (1991), other contributors to
39 represent as much as 8% of variance in firm the debate on the drivers of firm profitability have 39
C

performance, 15% of explained variance, and 57% assessed the relative impact of transient industry
41 of total industry effects on firm performance effects. Roquebert et al. (1996) analyzed 6 years of 41
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(Rumelt, 1991; Hawawini et al., 2003). Despite COMPUSTAT Business Segment data. McGahan
43 their impact, little or no effort has been made to and Porter (1997) replicated Rumelt’s (1991) 43
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evaluate the magnitude of transient industry
45 effects. The purpose of this paper is to offer a
47 *Correspondence to: IESE Business School, University of
Navarra, Avda. Pearson 21. 08034, Barcelona, Spain. E-mail:
aarino@iese.edu
model with 14 years of COMPUSTAT data. This
set of studies shows that industry year explains 2– 45
8% of variance in business unit profitability,
accounting for 3–12% of explained variance, and 47
18–57% of total industry effects (see Table 1)

Copyright # 2007 John Wiley & Sons, Ltd.

MDE :1426 PROD.TYPE: COM ED: VIJAYA

PAGN: UMESH SCAN: XXXX
pp.1^9 (col.¢g.: NIL) 3B2
MDE 1426
 MDE :1426
2 M. A. ARIÑO ET AL.

1 1
Table 1. Studies evaluating transient industry effects on business unit profitability
3 3
Study Data used Variance of business unit profitability explained by transient industry
effects
5 5
Total variance (%) Explained variance (%) Variance explained by
industry effects (%)
7 7
Rumelt (1991) 4 years of FTC LB data 5–8 10–12 49–57
Roquebert et al. 6 years of COMPUSTAT 2 3 18
9 (1996) business segment data 9
McGahan and 14 years of COMPUSTAT data 4 10 38
Porter (1997)
11 Hawawini et al. 10 years of Economic Profit and 11
(2003) Total Market Value data pro-
13 vided by the consultancy Stern 13
Stewart
* Including outliers 4–7 6–11 8–13

F
15 * Excluding outliers 4–6 9–15 20–32 15

O
17 17

O
19 More recently, Hawawini et al. (2003) made a performance relates to revenues as well as to costs. 19
twist in this literature first by using value creation Although profitability depends also on the busi-

21 measures as opposed to accounting measures, and
second by examining the influence of outliers on
23 firm and industry effects. Their findings show that
when the effect of outliers is not considered, the
25 industry-year effect accounts for a lower percent of
variance than when the industry top performers
27 and top losers are disregarded.
TE
PR
ness cycle, it depends on many other variables at 21
both the industry and the firm level.
Thus, our paper differs from previous work 23
in that (1) the level of analysis is not the firm
but the industry; and (2) our dependent variable is 25
D
not profitability but the level of activity. In
addition, we present a direct way to measure the 27

Despite the importance of transient industry impact of general economic activity}as repre-
29 effects, to the best of our knowledge, no one sented by the business cycle}on industry activi- 29
has suggested a method to evaluate their magni- ty}as represented by some adequate measure in
EC

31 tude. This may be due to the fact that transient each case. 31
industry effects have been studied in the context This paper is organized as follows: after this
33 of assessing their importance relative to other introduction, we present in the next section our 33
drivers of firm profitability, and the analysis of method to assess the impact of the business cycle
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35 variance technique used for this purpose does not on the level of activity of an industry. To make the 35
require direct measurement of the independent method easier to understand, we present simulta-
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37 variables (Mauri et al., 1998). However, if we are neously the application of the method to a specific 37
to advance our understanding of the economic sector: the Spanish sparkling Champagne-like
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39 processes that underlie inter-firm performance wine (cava) industry.1 We present briefly the 39
differences (McGahan and Porter, 1997), then we application of the method to other industries for
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41 need a method to measure transient industry illustration purposes as follows. We conclude the 41
effects. paper suggesting contributions, limitations, and
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43 Our main goal in this paper is to propose a possible extensions of this research. 43
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systematic way to analyze and measure the impact

45 of the business cycle not on the performance, but 45
on the level of activity of a specific industry. We
47 should expect the business cycle to have a greater A MODEL TO EVALUATE TRANSIENT 47
impact on the activity of an industry than on its INDUSTRY EFFECTS: AN APPLICATION TO
49 profitability. This should be the case because THE SPANISH CAVA INDUSTRY 49
industry activity is more related to the business
51 cycle than profitability is, the reason being that As stated in the introduction, our purpose in this 51
activity is associated with industry revenues, while article is to develop a method to assess the impact

Copyright # 2007 John Wiley & Sons, Ltd. Manage. Decis. Econ. (2007)
DOI: 10.1002/mde
MDE 1426
 MDE :1426
TRANSIENT INDUSTRY EFFECTS 3

1 CAVA PRODUCTION 1
(domestic spanish market; thousands of bottles)

3 100.000 3

5 5
90.000

7 7
80.000
9 9

11 70.000 11

13 60.000
13

F
15 15
50.000

O
1974

1977

1980

1983

1986

1989

1992

1995

1998
17 17

O
19 Figure 1. Evolution of the production of cava in Spain for the domestic market. 19

PR
21 21
of the business cycle on the level of activity of an rate of GDP in the country or economic region in
23 industry. We present it by applying to the Spanish which we are studying the industry. Since we are 23
cava industry. In order to understand how the interested in long-term relationships rather than
25 business cycle influences the level of activity of a on specific events, yearly data will be used. Also, 25
D
particular industry, the first thing we need is an this allows us to avoid seasonal effects. We
27 indicator that measures the level of activity in that obtained data on the Spanish GDP from the 27
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industry. We can measure the absolute level of Instituto Nacional de Estadı´stica. Figure 2 shows
29 activity or the rate of change of that activity. In the the evolution of the growth rate of the Spanish 29
case of the Spanish cava sector, this indicator GDP. We can see a period of economic expansion
EC

31 could be the number of bottles produced (as in this
market production can be adjusted to meet
33 demand, cava bottles need not to be stored; hence,
in this industry production equals sales, and as
R
in Spain in the late 1980s followed by an economic 31
crisis in the early 1990s, and a recovery in the
second half of that decade. 33
Since the general economic activity is measured

35 sales match demand, production is equal to as a growth rate, we also chose the growth rate of 35
consumption2). Data on cava production for the the Spanish cava production for the domestic
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37 domestic market were obtained from Consejo market as a measure of activity of the industry. To 37
Regulador del Cava, an industry-level association. explore the relationship between economic activity
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39 Figure 1 presents the evolution of production of in Spain and the cava industry activity, we will 39
cava for the domestic market in Spain. We choose focus on two graphics, the one that shows the
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41 the period 1985–1998, for the analysis, because as evolution of both variables in time (Figure 3) and 41
Figure 1 shows, in that period the industry has the scatter plot graph (Figure 4).
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43 gone through a complete up–down–up cycle. This Regressing our dependent variable (cava indus- 43
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time window provides an opportunity to explore
45 cycle effects. The 1985 year choice is somewhat
arbitrary, but the graph in Figure 1 suggests that
47 year might be a good choice. Nonetheless, we run
similar analysis with data starting one and two
49 years before and after, and results remained very
similar.
51 We also need an indicator of the business cycle.
Typically, the indicator we use will be the growth
try activity) onto our independent variable (Span-
ish economic activity) we obtain the relationship 45
between these two variables. Table 2 summarizes
the statistics of this regression. We can see a strong 47
relationship between both variables, given by a t-
statistic of 4.58 and an F value of 21.06, well above 49
the critical 5% level of 4.74 for an F distribution
with 1 and 12 degrees of freedom. An R2 of 0.63 51
means that 63% of the variations of the growth

Copyright # 2007 John Wiley & Sons, Ltd. Manage. Decis. Econ. (2007)
DOI: 10.1002/mde
MDE 1426
 MDE :1426
4 M. A. ARIÑO ET AL.

1 SPANISH GDP GROWTH RATE 1

8%
3 3

5 6% 5

7 4% 7

9 2% 9

11 11
0%

13 13
-2%
1974

1977

1980

1983

1986

1989

1992

1995

1998

F
15 15

O
Figure 2. Evolution of the growth rate of the Spanish GDP.
17 17

O
19 % GDP - % CAVA PRODUCTION 19
(Spanish domestic market)

PR
21 7% 8% 21
6% 6%
23 5% 4%
23
4% 2%
25 25
D

% CAVA
% GDP

3% 0%
2% -2%
27 27
TE

1% -4%
0% -6%
29 29
-1% -8%
EC

31 -2% -10% 31
1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

33 GDP Cava production

33
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35 Figure 3. Spanish GDP and cava production (in growth rates). 35

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37 37
rate of cava bottles produced in Spain for the grow about 0.83% per year (this is the average
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39 domestic market can be explained by the Spanish growth rate for the period under study). Taking 39
economic cycle as measured by the growth rate of into account the stage of the business cycle allows
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41 the Spanish GDP. The coefficient 1.73 means that us to be more specific about the current growth 41
for every percent point of increase in the Spanish rate in the activity of the industry. Figure 5 shows
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43 GDP, we may expect an increase of 1.73% in the us these gains. Figure 6 shows how this growth 43
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growth rate of cava bottles produced for the rate translates into current cava bottles produced.
45 domestic market. Analyzing the data we could say that in the 45
We will use this model to present and to 1985–1998 time period the Spanish domestic cava
47 illustrate our method to analyze the impact of market grew at an average growth rate of 0.83%. 47
business cycle on an industry’s level of activity. There were fluctuations around this average level,
49 This model allows us to improve our under- and these fluctuations were due to a number of 49
standing of a given sector. For instance, if we different causes. From the previous analysis we
51 had no information about the economic situation, can say that the business cycle accounts for 63% of 51
we would assess the activity of the cava industry to these fluctuations. Hence, we will say that the

Copyright # 2007 John Wiley & Sons, Ltd. Manage. Decis. Econ. (2007)
DOI: 10.1002/mde
MDE 1426
 MDE :1426
TRANSIENT INDUSTRY EFFECTS 5

1 % GDP - % CAVA PRODUCTION 1

(Spanish domestic market)

3 8% 3
6%
5 5
4%
2%
7 % CAVA
7
0%

9 -2% 9
-4%
11 -6% 11
-8%
13 -10%
13
-2% -1% 0% 1% 2% 3% 4% 5% 6% 7%

F
15 % GDP 15

O
Figure 4. Relationship between growth rate of GDP and growth rate of cava production in Spain.
17 17

O
19 19
Table 2. Statistics of the regression of the growth
point in the growth rate of the Spanish GDP
rate cava production and growth rate of

PR
21 GDP translates in an additional production of 1.57 21
million of bottles of cava. All these findings are
23 %Cava ¼
4:32% þ 1:73ð4:58Þ GDP þ e summarized in Table 3. 23
n
F ¼ 21:06; F5% ð1; 12Þ ¼ 4:74; p ¼ 0:06%
R2 ¼ 0:63
25 25
D
27 SOME ILLUSTRATIONS 27
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exposure of the domestic cava industry to the

29 business cycle is 63%. When the growth rate of the Next, we briefly present two examples to illustrate 29
Spanish GDP is 3%, which is the average Spanish the framework presented to analyze the impact of
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31 GDP growth rate for the period considered, the
growth rate of cava production is 0.83% on
33 average. We say ‘on average’ because there may
be other causes different from the growth rate of
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the business cycle on an industry’s level of activity. 31
The first one will be about the beer industry in
Spain. The second example will be a comparative 33
study of the automotive industry in different

35 GDP that affect fluctuations in cava production. countries. 35

These other causes are responsible for the devia- (a) The Spanish beer industry: To analyze the
R

37 tions from the 0.83 average growth rate of bottles impact of the business cycle on the beer industry, 37
produced. In fact, these causes account for 37% of we will use as an indicator of the activity of this
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39 the fluctuations. industry the consumption of beer in Spain 39

Together with the concept of exposure, an measured as the total number of hectoliters of
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41 important aspect of our model is the intensity of beer consumed in Spain. We will consider for our 41
the exposure, which measures the impact of a study yearly data from 1987 to 1998 that also
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43 percent point of change in the general economic captures an entire business cycle. As was the case 43
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activity on the industry activity. From the
45 equation in Table 2, we can say that for each
extra percent point in the growth rate of the
47 Spanish GDP the cava production for the domes-
tic market increases by 1.73% (hence, the intensity
49 of this exposure is 1.73). This extra growth rate
can be easily translated to absolute terms (number
51 of bottles) and it means that, as the 1998 level of
production is 91 million bottles, an extra percent
in the cava industry, sensitivity analyses consider-
ing different starting years around 1987 yield 45
similar results. Figure 7 shows the time series
graph of the growth rate of the consumption of 47
beer in Spain and the growth rate of GDP.
The regression output between these two vari- 49
ables is presented in Table 4. We can conclude
from this analysis that the exposure of this 51
industry to the economic cycle is 67%. The

Copyright # 2007 John Wiley & Sons, Ltd. Manage. Decis. Econ. (2007)
DOI: 10.1002/mde
MDE 1426
 MDE :1426
6 M. A. ARIÑO ET AL.

1 GROWTH RATE OF CAVA PRODUCTION vs THE MODEL 1

8%
3 3
6%

5 4% 5

GROWTH RATE
2%
7 0% 7
-2%
9 9
-4%

-6%
11 11
-8%

13 -10% 13
1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

F
15 % Cava Model Average
15

O
17 Figure 5. Growth rate of cava production in Spain. Average growth rate, real growth rate and production growth 17
rate according to the model.

O
19 19

PR
21 21
CAVA PRODUCTION vs PRODUCTION ACCORDING TO THE MODEL

23 100.000 23

25 25
D
THOUSAND OF BOTTLES

95.000

27 27
TE

90.000

29 29
85.000
EC

31 31
80.000

33 33
75.000
R
1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

35 35
R

Cava production Model Average

37 37
Figure 6. Cava production in Spain. Real cava production. Cava production according to an average growth rate
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39 and according to the growth rate of the model. 39

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41 41
intensity of the exposure of this industry to
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43 Table 3. Summary of the impact of the business business cycle in percent terms is 1.38. This means 43
cycle on the domestic Spanish cava that for each extra percent point of increase in the
U

industry Spanish GDP the growth rate of the consumption

45 45
of beer in Spain increases by 1.38%, which in
Impact of the economic activity in the Spanish cava market
47 Maturity 1985 absolute terms means around 373 thousand 47
Average growth rate 0.83% hectoliters. To save space we do not report any
Exposure 63% other graphic related to this example.
49 Level 3%
49
Intensity (b) The automotive industry in developed coun-
51 Percent 1.73 tries: The analysis of the automotive sector in 51
Units 1.57 million different countries will allow us to compare

Copyright # 2007 John Wiley & Sons, Ltd. Manage. Decis. Econ. (2007)
DOI: 10.1002/mde
MDE 1426
 MDE :1426
TRANSIENT INDUSTRY EFFECTS 7

1 GDP - % BEER 1
7% 10%
3 3
6% 8%
5 5% 6% 5
4%
4%
7 7

% BEER
GDP 3%
2%
2%
9 0% 9
1%
0% -2%
11 11
-1% -4%

13 -2% -6% 13
1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

F
15 15
GDP % BEER

O
17 Figure 7. Spanish GDP and consumption of beer in Spain (in growth rates). 17

O
19 19

PR
21 21
Table 4. Statistics of the regression of the growth
fluctuations in industry activity, the remaining
rate of the Spanish beer consumption and
23 growth rate of GDP 80% being due to other causes. In the Italian case, 23
it is surprising to observe that even though
25 this exposure is small, its intensity is 5: each 25
D
%Beer ¼
3:4% þ 1:38ð4:48Þ GDP þ e
n
F ¼ 20:12; F5% ð1; 10Þ ¼ 4:96; p ¼ 0:12% percent point of change in the growth rate of the
R2 ¼ 0:67
27 Italian GDP translates in a 5% of change in the 27
TE

growth rate of the Italian car industry. This

29 contrasts with an intensity of the exposure of 2 29
how sensitive the sector is with the different in the German car industry. We can say that the
EC

31 economic environments. We are going to apply intensity of the car industry in Italy is 5 while in 31
our methodology to the automotive industry in the Germany it is 2.
33 US, France, Germany, United Kingdom, Italy, The findings of this study of the automotive 33
Spain and Japan. We show only the results, as the industry are somehow surprising. Many industry
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35 methodology is the same as we used in the cava reports highlight the fact that this industry is 35
and beer industry cases. We use the number of car highly cyclical and very dependent on the business
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37 registration (either nationally manufactured or environment. We see from our analysis that 37
imported) in a given country as the index of although this is true for some countries (The US,
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39 activity of the industry. Data were obtained from Japan and Germany have a exposure between 50 39
Instituto Nacional de Estadı´stica. Table 5 sum- and 60%), this dependence is not as high as
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41 marizes our findings. Average sales in the studied one would suspect in others (France and Italy 41
period range from 10 million of yearly car have an exposure around 20 and 30%). Probably,
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43 registrations in the US to one million in Spain. the general feeling that this industry is very 43
U

The second largest market is Japan with 4.5
45 million of car sales per year on average (see
Table 5).
47 The exposure of this industry to the business
cycle is not as deep as was the case for the cava and
49 beer industries in Spain. The Japanese market is
the most exposed one to the business cycle with an
51 exposure of 60%, while in the Italian market the
business cycle accounts only for 20% of the
sensitive to the business cycle is founded in the
intensity of the exposure. The intensity of this 45
exposure is very high, ranging from 2 in the
case of Germany to 5.5 in the case of Spain. It 47
means that small fluctuations in the business cycle
translate into great fluctuations in the car industry, 49
although there are other variables that, taken
together, have also a great impact on the activity 51
of this industry.

Copyright # 2007 John Wiley & Sons, Ltd. Manage. Decis. Econ. (2007)
DOI: 10.1002/mde
MDE 1426
 MDE :1426
8 M. A. ARIÑO ET AL.

1 1
Table 5. Summary of the impact of the business cycle on the automotive industry in different countries
3 3
Average sales (millions of units) Exposure (%) Intensity

5 % Units (thousands) 5
US 10 50 2.8 280
7 France 2.0 30 4.5 70 7
Germany 3.5 50 2.0 60
UK 2.0 55 3.5 70
9 Italy 2.0 20 5.0 100 9
Spain 1.0 45 5.5 60
Japan 4.5 60 2.5 100
11 11

13 13
CONCLUSION produced, the number of hectoliters of beer

F
15 consumed, or the number of car registrations per 15
The method presented in this paper is a simple but year in an economy are good indicators of the

O
17 powerful way to assess transient industry effects. activity of these industries, and they are very 17
Most studies on industry analysis recognize the simple to measure. Summarizing yearly activity in

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19 impact that the business cycle has on the level of a single number may be more difficult in other 19
activity of an industry and, therefore, on firms’ sectors. In the tourism industry, for instance, it is

21 performance. This study moves forward past
research by presenting a way to quantify that
23 impact. We go beyond description and offer a tool
that allows predicting transient industry effects
25 based on forecasts of business cycle, which are
available from public sources typically, something
27 very valuable from a managerial perspective.
TE
PR
not clear which indicator to use. The number of 21
overnights in hotels, or the occupancy rate of
hotels could be indicators of the activity of this 23
sector, but it is difficult to believe that these
indicators fully represent the whole activity of the 25
D
industry. Eventually, one can use both measures to
have a better understanding of the relationship. 27

The concept of exposure developed in this paper Finding good measures of activity is even more
29 may help managers to gain insights into how to difficult in sectors with more intangible activities. 29
create some kind of sustainable competitive The study of a global sector is somewhat
EC

31 advantages for their companies. For a manager,
knowing which is the exposure of her industry to
33 the general economic conditions may be helpful to
assess up to what extent she can create mechan-
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problematic. For instance, the automotive indus- 31
try is generally characterized as a global one, in
which imports and exports have an important 33
weight with a relatively small number of compa-

35 isms within her company, which insulate it from nies selling in different national markets. Despite 35
the ups and downs of the general economy. If the the global nature of the industry from the supply
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37 industry is very independent of the business cycle side, the demand remains domestic. Consistent 37
(low exposure), there are little possibilities to with this view, our treatment has taken registra-
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39 insulate her company from the environment. If tions as the indicator of industry activity, and the 39
the industry is quite dependent on the business analysis has focused on the different national
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41 cycle, there are opportunities to differentiate from markets. In industries such as airplane manufac- 41
competitors by ideating some way of making the turing in which the demand, and not just the
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43 company more independent of the general econo- supply, may be considered as global this treatment 43
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my, and hence reducing the risk due to the general
45 economic environment.
The method we have developed in this paper to
47 analyze the impact of the business cycle climate
(measured as the growth rate of GDP in an
49 economy) on specific industries requires first of all
an indicator of the level of activity in a given
51 sector. In the examples presented above this was
an easy task. The number of bottles of cava
would not be appropriate.
There are two main differences between our 45
study and the aforementioned research. First, the
level of analysis here is the industry rather than the 47
firm; and second, we here try to explain the activity
of an industry while the previous studies take 49
performance as the variable to explain. Roughly
speaking the activity of an industry can be 51
associated with the ‘sales’ or ‘revenues’ in that

Copyright # 2007 John Wiley & Sons, Ltd. Manage. Decis. Econ. (2007)
DOI: 10.1002/mde
MDE 1426
 MDE :1426
TRANSIENT INDUSTRY EFFECTS
1 industry, while performance is associated with the
return, commonly measured as return on equity or
3 return on assets. This may explain why in our
examples we found that business cycle accounts
5 for more than 50% of industry activity, while in
the previous research transient industry effects
7 account for less than 10% of total variance in
performance (see Table 1). Industry activity
9 (revenues) is just one part of the equation of
performance, but performance takes into account
11 not only revenues but also costs. Thus, it is not
surprising that the impact of general economic
13 activity on the performance is lower than on
activity.
15 Similar studies can also be carried out at the
firm level, responding to the call for further
17 research on the firm–year interaction effect
(Hawawini et al., 2003). The exposure and
19 intensity of the exposure of a firm to the business
cycle remains to be explored. Our conjecture is
21 that the business cycle will have a lesser impact on
a firm’s activity than on the industry, as that
23 impact will be larger the more aggregated the unit
of analysis.
25 This study may be extended in a number of
ways. For instance, the present research could be
27 completed with the study of the impact of other
TE
macroeconomic variables}such as interest rates,
29 exchange rates or government subsidies}on
the activity of a given sector. Which are the
EC
31 relevant macroeconomic variables may depend
on the industry of study, as it is unlikely that
33 one particular variable affects all of the industries
to some extent. Thus, this extension should
R
35 be specific to each industry, but the general
method to use would be the one presented in this
R
37 paper.
O
39
C
41
NOTES
N
43 1. The Spanish Champagne-like wine is called ‘cava’.
U
Regulatory reasons prevent calling Champagne any
45 Champagne-like wine not produced in the French
region of Champagne.
2. In industries in which production is not equal to
47 demand, industry activity should be measured as
sales. This is the case of the airline or the tourism
49
51
Copyright # 2007 John Wiley & Sons, Ltd.
MDE 1426
9
industries. Production in the airline industry can be 1
measured as available aircraft seats, but industry
activity is to be measured as seats occupied, total 3
revenues or some adequate indicator of activity.
5
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Manage. Decis. Econ. (2007)
DOI: 10.1002/mde
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