We decompose the inter‐firm variance in profit rates into economic and organizational components. Using a representative model from each paradigm we find that both sets of factors are significant determinants of firm performance. Further findings are that the two effects are roughly independent and that organizational factors explain about twice as much variance in profit rates as economic factors.

c T-This paper examines the popirlar myrh that managers in high-technology industries are altering their critical R& D investments in response to the .short-term profit pressures of large institutional stockholders. The study entails an empirical examination of the relationship between R&D spending and institutional ownership over a I0-year period for 129 firms based in four research-intensive industries. Contrary to the view that institutional investors are having a damaging affect oft R& D spending, ufter controlling for intervening effects the results suggest that higher levels of institutional ownership may be associated with greater R& D expenditures. A number of possible explanations for this finding are developed.

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The paper hypothesizes that diversification by firms based in the pharmaceutical industry during the 1977‐86 time period was primarily undertaken to reduce the risks associated with being dependent upon a technologically dynamic environment. Consistent with this non‐efficiency motive for diversification, declining economic performance is predicted. A longitudinal empirical analysis provides support for these propositions.

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