Title: Technological capabilities and rent eroding battles: Scandinavia centric evidence on firm profitability

Authors: Muhammad Azeem Qureshi; Tanveer Ahsan; Saqib Aziz; Muhammad Yousaf

Addresses: Oslo Business School, Oslo Metropolitan University, Oslo, Norway ' Department of Finance, Rennes School of Business, Rennes, France ' Department of Finance, Rennes School of Business, Rennes, France ' Institute of Business and Management (IBM), University of Engineering and Technology, Lahore, Pakistan

Abstract: This paper furthers our understanding towards determinants of firm profitability using the data of listed firms from Scandinavia over the period from 2002 to 2015. Applying robust generalised method of moments (GMM) and ANCOVA techniques, we show that firm size, capital intensity, leverage, and growth are the major drivers of firm profitability in Scandinavia. A predominantly positive effect of size over profitability is in line with the broader prior evidence while a simultaneous negative capital intensity-profitability relationship is in contrast with the evidence from rest of the Europe. This contrasting effect may potentially be explained as an outcome of a suboptimal deployment of technological investments and/or rent-eroding battle among the incumbent firms operating in Scandinavia. Our results are robust to reverse causality and alternate proxies of capital intensity.

Keywords: profitability; capital intensity; firm size; Scandinavia; panel data analysis.

DOI: 10.1504/IJEBR.2020.104756

International Journal of Economics and Business Research, 2020 Vol.19 No.2, pp.130 - 151

Received: 03 Jan 2019
Accepted: 28 Mar 2019
Published online: 30 Jan 2020 *

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