Investment and Firm Performance Variability

여희정 한국무역학회 2023 Journal of Korea trade Vol.27 No.1

Purpose – The study analyzed 90 online firms worldwise and observed them for ten years to investigate their investments and firm performance variabilities. This study attemped to verify the existence of agency problems in online firms. Through this, the paper intends to expand the scope of research in the fields of investment and firm value both empirically and in theory. This study also attempted to supplement the insufficient logic of previous studies by analyzing the relationship between investment and profitability. Design/methodology – In this study, the investment is subdivided into over-, under-, and neutral investments, and an empirical analysis of the firm performance was conducted. As investment generally has long-term effects, the impact of a firm's investment on future firm performance and variabilities in firm performance was considered over the short-and medium-term period. Findings – It was found that there was a negative relationship between firms with an overinvestment and future firm performance. Underinvestment has no clear statistically significant results on firm performance. This implies that overinvestment causes more reduction in future firm performance than underinvestment. It was also found that underinvestment and overinvestment significantly increased the variability of firm performance. A positive significance was found between under- and over- investment with a variability of 3 years and overinvestment with a variability of 4 years in the future. A negative relationship was found between neutral investment propensity and future performance variabilities. Neutral investment has less effect on the future performance variability of a firm than a firm’s overinvestment and underinvestment. For online firms, underinvestment and overinvestment have a greater effect on the firm's future performance variability than neutral investment. Originality/value – The agency theory predicts that information asymmetry and adverse selection problems exacerbate conflicts of interest among stakeholders, thus firm performance. The study contributed to accumulating research on online firms that are currently underexplored by analyzing the investment behavior of major firms in the online industry.

기업의 환경성과가 재무성과와 기업가치에 미치는 영향에 관한 실증연구

김용현 ( Yong Hyeon Kim ),최선 ( Sun Choi ),장승욱 ( Seung Wook Jang ) 한국생산성학회 2018 生産性論集 Vol.32 No.4

There has been a long-run debate on the effect of environmental performance on financial performance and firm value. Proponents of environmentally friendly management argue that investments and efforts of improving environmental performance induce firms to have physical assets, technological innovations, better human resources, and good reputation, etc. As a result, firms can have competitive advantages by increasing sales and profit as well as environment protection. However, opponents of environmentally friendly management advocate that firms cannot take full benefit of investments and effort in environmental matters in the real world. Previous empirical papers that investigate the relationship between environmental performance and financial performance (or firm value) failed to find a consistent results because of several problems including limited measurements of environmental and financial performances, endogeneity, and omitted variables. This study examines the effect of corporate environmental performance on its financial performance and firm value in Korea. Whereas prior empirical studies examined the effect mainly focused on accounting measures, current study uses financial measures of stock returns and operating performance, and firm value of Tobin’s Q with longer sample period and larger sample firms. Also, this paper deliberately uses fixed-effects panel regression models with 1-year lag to alleviate the endogeneity problem. We use the environmental performance score from the Korea Economic Justice Institute (KEJI) from 2009 to 2014 for gauging corporate environmental performance. We find that the firms with higher environmental performance score have insignificantly lower stock returns compared with the firms with lower score. However, we report that the firms with higher environmental performance score have higher operating performance and firm value compared to the firms with lower score, which is consistent with previous empirical studies. Moreover, the results of various panel regression models clearly show that the environmental performance factor have a positive impact on firm value. Our findings suggest that corporations are able to improve financial performance and firm value by investing in environmental initiatives although firms bear the whole costs of environmental activities.

최고경영진의 직무관련 다양성과 기업성과

박종훈(Jong Hun Park),이호욱(Ho Uk Lee) 한국경영학회 2005 經營學硏究 Vol.34 No.2

Despite the continuing argument that TMT diversity is important for firm performance, empirical results have been inconsistent. Prior research has reported positive relationships, negative relationships, and even no relationships. Previous research has described TMT diversity as a “two-edged sword”(Milliken & Martins, 1996) or “mixed blessing”(Williams & O’Reilly, 1998). As such, TMT diversity can have both positive and negative effects on firm performance. The positive aspects of greater TMT diversity include generating a wider set of alternatives to decrease groupthink, predicting environmental changes more accurately to increase adaptation, and successfully implementing strategic choices through a more procedurally just process(Jackson, 1992; Kim & Mauborgne, 1991; Lant, Milliken, & Batra, 1992). The negative aspects include delayed decision-making, communication breakdowns, and interpersonal conflict(Greening & Johnson, 1997 Hambrick & D’Aveni, 1992 O’Reilly, Snyder, & Booth, 1993). If the functional aspects of TMT diversity dominate the dysfunctional ones then TMT diversity will havea positive effect on firm performance. On the other hand, if the dysfunctional aspects of TMT diversity arestronger, then we would observe a negative association between TMT diversity and firm performance.The dual aspects of TMT diversity suggest that the relationship between TMT diversity and firm performance cannot be unilaterally argued to be either positive or negative. Rather, the specific context will likely moderate this relationship such that it will become more positive in contexts that accentuate the functional aspects of TMT diversity and/or attenuate the dysfunctional aspects. The purpose of this paper was to reconcile the mixed findings in prior research for the association between TMT diversity and firm performance by examining the role of external and internal contexts. We argued that the effect of TMT diversity on firm performance is not identical in all situations but is rather strengthened depending on the particular context. we examined the roles of external and internal contexts for the relationship between TMT diversity and firm performance. With regard to the external context, we argued that environmental uncertainty moderates the relationship between TMT diversity and firm performance such that the relationship is more positive with increases in environmental uncertainty. Our results provide partial support for our argument. We found that environmental uncertainty acts as a moderator for the educational diversity/firm performance and the tenure diversity/firm performance relationships, respectively. In contrast, we found that environmental uncertainty does not moderate the functional diversity/firm performance relationship. Regarding the internal context, we argued that as TMT physical proximity increases, the relationship between TMT diversity and firm performance becomes more positive. Our results provide partial support for our argument. With respect to TMT educational and tenure diversity, we found such a moderating effect of TMT physical proximity. Our findings imply that providing the top team with the social context that increases behavioral integration is important for firm performance. Thus, along with the external context, the internal context is also critical for the TMT diversity/firm performance relationship. An important implication of these results is that increases in firm performance resulting from a more diverse top team with closer physical proximity are more pronounced in more uncertain environments. Overall, our study contributes to the literature by accounting for the importance of contextual variables when examining the TMT diversity/firm performance relationship.

Nonlinear Effects of Concentrated Ownership on Firm Performance and Performance Volatility

Hae-Young Byun 한국무역연구원 2012 貿易 硏究 Vol.8 No.2

This paper investigates the effect of concentrated ownership of KOSPI (Korea Composite Stock Price Index) firms on firm performance, performance volatility, and firm value considering nonlinearity. Recent Korean studies suggest that concentrated ownership of KOSPI firms are nonlinearly associated with firm value. However, there is no noteworthy research on the relation between the effect of controlling shareholders of KOSPI firms and firm performance and performance volatility. This study offers such empirical evidence using a sample of KOSPI firms from 2005 to 2007. Based on a sample of 1,227 KOSPI firms, this study finds that (1) the KOSPI firms’ concentrated ownership has a significant impact on firm performance and performance volatility, and (2) the relation among firms’ concentrated ownership, firm performance, and performance volatility is nonlinear, inverted U shape, and U shape respectively. In addition, concentrated ownership is also nonlinearly related with firm value. After controlling for the endogeneity between variables, the nonlinear effects of concentrated ownership on firm performance, performance volatility, and firm value are still robust.

A Study on the Relationship between Environmental Corporate Social Responsibility, Corporate Image and Firm Performance in Chinese Enterprises

왕서양,나상균,엽정 한국경영교육학회 2019 경영교육연구 Vol.34 No.6

[Purpose]The purpose of this study is to analyze the relationship between environmental corporate social responsibility (ECSR), corporate image and firm performance. This paper also analyze the mediating effect of corporate image between ECSR and firm performance. [Methodology]The relationship between research variables were analyzed using the survey method. The research model and hypothesis were validated using SPSS Statistics 22.0 and AMOS 22.0 based on 304 questionnaires. [Findings]As a result of the study, ECSR has a positive effect on corporate image and firm performance. Besides, corporate image plays a positive effect on firm performance. Furthermore, corporate image also has a positive mediating effect between ECSR and firm performance. [Implications]ECSR is analyzed to influence the effect on corporate image and firm performance. In addition, it is analyzed that ECSR affects firm performance. Hence, the firms should pay attention to ECSR in order to affect firm performance. The firms pay more attention to ECSR, the firm can get higher firm performance in future. Although the ECSR may increase the cost in a short time. It is analyzed that ECSR plays an important role in the firm performance. This paper also analyzes that the corporate image has a mediating effect on the relationship between ECSR and firm performance.

이사회 속성과 기업성과에 관한 연구

정무관(Mugoan Jeong),이인석(Insuk Lee),이동섭(Dongseop Lee),남창수(Chang S. Nam),박경미(Kyoungmi Park) 한국인사조직학회 2009 인사조직연구 Vol.17 No.2

이사회는 최고경영자가 기업을 경영하는 과정에서 이루어지는 전략적 의사결정을 승인하고 경영성과를 평가하여 기업성과를 향상시키고, 주주의 이익을 대변한다. 많은 연구자들은 이사회 구성이나 구조와 같은 이사회 속성이 기업성과에 미 치는 영향을 실증적으로 검증하고자 노력하였다. 그러나 이사회 속성이 기업성과에 긍정적인 영향을 미친다는 일관된 결과를 보이지는 못하고 있다. 따라서 본 연구에서는 이사회의 역할을 중심으로 기존 연구들의 문제점들을 파악하고 이를 해결할 수 있는 방안을 제시하여, 이사회 속성과 기업성과간의 관계에 대한 논란을 해결해 보고자 하였다. 이사회의 역할에 대한 중요성은 소유경영인 기업이나 전문경영인 기업이라고 해서 달라지지는 않지만, 최고경영자가 소유경영인이냐 전문경영인이냐에 따라 특정 역할의 중요성은 달라질 수 있다. 또한 이사회의 두 역할인 통제역할과 지원역할은 기업성과 향상을 통하여 주주이익의 극대화를 추구한다는 목적은 동일하지만, 관점에 따라 두 역할이 주장하는 바가 서로 상충되거나 지향하는 방향이 다를 수 있다. 그러므로 본 연구에서는 먼저 전문경영인 기업과 소유경영인 기업을 구분하여 이사회를 바라볼 필요가 있음을 주장하였다. 그리고 이사회의 통제역할과 지원역할의 관점에서 이사회 속성이 기업성과에 미치는 영향을 각각 고려한 후, 이를 통합하여 이사회 속성이 기업성과에 미치는 영향을 보다 명확하게 규명하고자 하였다. 이사회 속성이 기업성과에 미치는 영향은 기업의 상황요인에 따라 특정 역할의 중요성이 보다 강조될 수 있으므로 기업이 처한 내ㆍ외부적 상황요인도 고려하고자 하였다. In most companies, a board of directors (BOD) is an important strategic issue for global competition, because the BOD plays a key role in shareholder profit and firm performance through monitoring and supporting activities for CEOs. But, in many cases, the relationship between the BOD and the firm’s performance is inconsistence. Many recent studies explore the following issues:How can firm performance be linked with the BODs? Does the BOD play a major role in firm performance? Is it enough that the BOD is the only mechanism driving to improve firm performance in today’s business environment? Finally, why is it so difficult to find legitimate evidence to support a positive correlation between firm performance and the BOD? To answer these inquires, various research variables were reviewed and tested to prove effectiveness issues associated with the BOD. The basic assumptions for this study are as follows. First, there are only a few studies that contain CEO typology as a useful factor to measure firm performance. For example, nearly 30 percent of companies listed in the S&P 500 and KOSPI are operated by owner-managers. However, many studies do not assume that the owner-manager is an important factor for analysis. The monitoring role of the BOD has its theoretical base in classical agency theory. Classical agency theory helps to explain the existence of the BOD as an important internal mechanism to reduce agent cost. Furthermore, the theory suggests that the role of the board members is monitoring manager/executive opportunistic behavior for self-interest. Owner-managers are compelled to maximize the firm’s profit because of their stance as both an owner and a manager. Thus the role of the BOD as a monitor seems much less important in owner-manager operated organizations. Second, there exists a theoretical contradiction in explaining the role of the BODs. One of the most important theoretical bases, agency theory, is used to explain the role of the BOD (as a controlling body). Other theories include resource dependence perspective and the stewardship theory, which view the BOD as a supporting body. A supporting role for BODs may raise conflict in the real world even though they may have the same goals to maximize shareholder profit through better firm performance. In a view of “control,” CEO duality means that the chairman and CEO positions are occupied by the same person, which might have a negative effect on firm performance, due to the heavy dependence of the BODs on company CEOs. The “support” view of CEO duality could be good for firm performance, because a lot much of compromising decision making can be decreased by CEO duality. Third, It is clear that the BOD’roles influence BOD efficiency and firm performance. Four major variables are explored for further research: board composition (e.g., inside directors, affiliated directors, independent directors, and outside directors), board size, CEO duality, and social network. Considering the monitoring role of the BODs, outside directors might be much more effective than their inside counterpart. Also, to satisfy the control role for the BODs, it is important that the independent directors are far from CEO influence. For the supporting role, the BODs are not only expected to secure a variety of company resources from outside, but they also have the ability to buffer uncertainties from outside environments. As a consequence, once both monitoring and supporting roles are properly appointed to outside directors, they will have a positive effect on firm performance. Like outside directors, board size will positively influence a firm’s performance if both monitoring and supporting roles are permitted. However, CEO duality and social networking may not be strongly correlated with firm performance, because both monitoring and supporting roles of the BODs may play a role in opposite directions. Both internal and external situations can influence the BOD and fir

자기효능감과 기업성과

이종건(Jong Keon Lee),김현철(Hyeon Cheol Kim),안태항(Tae Hang Ahn) 한국경영학회 2014 經營學硏究 Vol.43 No.2

Entrepreneurial orientation and entrepreneurial experience are useful as explanatory variables in explaining the effects of self-efficacy on firm performance. According to the upper echelon theory, CEO plays a critical role in shaping and positioning the organization strategically to achieve performance, using their personal traits of individuals to influence organizational dynamics(Carmeli, 2008). Although previous research has suggested that self-efficacy had a positive effect on firm performance(Drnovsek & Glas, 2002; Hmielesky & Baron, 2008; Westerberg, Singh, & Hackner, 1997), there is limitation in explaining how self-efficacy influences firm performance. Attention has been turned to entrepreneurial orientation (EO) in explaining entrepreneurial performance (Moruku, 2013). Entrepreneurial experience has been suggestedas an useful explanatory variable to account for firm performance (Lee & Tsang, 2001; Schiller& Crewson, 1997). Little attention has been turned to the role of entrepreneurial experience in the entrepreneurial orientation-firm performance relationship. The present study, therefore, developed the new research model that includes entrepreneurial orientation and entrepreneurial experience, extending the current model that includes the effect of self-efficacy on firm performance. This study examined relationships among self-efficacy, entrepreneurial orientation, entrepreneurial experience, and firm performance. Data were collected from 146 entrepreneurs in Korea. We used path analysis and regression analysis to test the direct and indirect effects of self-efficacy on perceptual measures of firm performance, as well as how firm performance might be moderated by entrepreneurial experience. Entrepreneurial orientation was used as the mediating variable for explaining the relationship between self-efficacy and firm performance. Entrepreneurial experience was used as the moderating variable for explaining the relationship between entrepreneurial orientation firm performance. Results indicated that self-efficacy and entrepreneurial orientation were positively related to firm performance. Self-efficacy also influenced firm performance positively through its effect on entrepreneurial orientation. Especially, entrepreneurial experience strengthened the positive relationship between entrepreneurial orientation and firm performance. The authors discuss both the study``s implications and future research directions.

The Effect of Performance Feedback on Firms’ Decision to Form an International Strategic Alliance and Performance in the Korean Manufacturing Industry

Sang-yun Han 한국무역학회 2021 Journal of Korea trade Vol.25 No.6

Purpose – International strategic alliance has been regarded as a strategic decision made by firms’ managerial problems and ensure performance growth. From the perspective of the proactive behavior for changing strategies in a global market, this study aims to identify whether performance feedback influences firms’ decisions to pursue strategic alliances. This study examines the effects of perfor￾mance feedback on performance when firms use strategic alliances. Design/methodology – To analyze the impact of performance feedback on forming an international strategic alliance, this study adopt the concept of performance feedback to develop a research model and our hypotheses. Thus, this study used a two-stage least squares unbalanced panel data analysis with random effects. This study is based on 24,543 observations from Korean manufacturing firms from 2007 to 2016. Findings – The results show that firms pursue the formation of strategic alliances more actively, if their past financial and R&D performance are lower than their aspiration level, based on the result of performance feedback. An in split sample analysis for examining the effect of a firm’s technology sophistication based on the OECD’s classification, negative innovation performance discrepancy has positive effects on the probability of international alliance in high-tech and medium-high-tech industries. Financial performance also improves when a firm decides to form a strategic alliance based on the results of performance feedback. Originality/value – This research extends recent efforts to better understand the effect of performance feedback on firms’ performance when they use strategic alliances. These findings suggest that the CEOs and managers of firms should consider the performance feedback perspective when deciding to pursue a strategic alliance to improve performance. In other words, the decision-makers in a firm must analyze and consider various complex variables inside and outside the firm and expand such subjects of examination to more complex and dynamic factors.

고성과 작업 시스템의 내적 적합성과 상황 적합성에 관한 연구

최장호(Jang Ho Choi) 한국경영학회 2010 經營學硏究 Vol.39 No.3

The research in the field of strategic human resource management argues that one of the sources for competitive advantages of a firm is the human capital in the firm and attempts to find out ways to attain the organizational goals; to increase motivation and job skills of employees and to improve the firm performance. Recently, many studies show the effectiveness of the high performance work systems to increase the performance of firms. By introducing a series of human resource management practices which are complementary to each other, high performance work systems can increase the financial performance such as sales level, net profit, or return on assets as well as non-financial performance such as commitment, satisfaction, or discretionary behaviors of employees. Previous studies on the high performance work systems explain the positive effect of the internal fit between HR practices and the positive effect of the fit between HR practices and organizational situation. However, there are only a handful of studies which investigate these fits empirically in Korea. Based on the categorization of the high performance work systems into three different types of HR practices, such as ability-enhancing HR practices, motivation-enhancing HR practices, and opportunity-enhancing HR practices, this study attempts to show the positive interaction effects between these three types of HR practices on the performance of firms and also show the positive moderating effect of employees` positive perception toward their managers in the relationship between high performance work systems and firm performance. This study uses the data which were collected in the first wave of the `Human Capital Corporate Panel Survey` conducted by Korea Research Institute of Vocational Education & Training. The `Human Capital Corporate Panel Survey` is a long term study of HR practices of firms, their employees` attitudes, and financial performance. Sampling is consisted of `corporate sampling` and `employee sampling`. Corporate survey samples are 441 firms including manufacturing, non-financial service, and financial service corporations and the target of the survey is HR managers in each firm. The results show that financial performance can be increased more when firms introduce different but complementary HR practices at the same time and that the positive perception of employees toward managers strengthen the association level between high performance work systems and firm performance measured by sales level of a firm. Even if there are some limitations, such as the causality issue and the measurement issue, this study has several implications. First, in terms of introducing HR practices, it would be better to choose a series of HR practices which are complementary to each other. The effectiveness of introducing new HR practices can be maximized when organizations attempt to implement HR practices which have similar effects on the behaviors or attitudes of employees. Second, communication with employees and making trust between management and employees are important for the successful implementation of new HR practices.

기업수명주기와 경쟁전략이 성과의 지속성에 미치는 영향

원자연 ( Jayoun Won ),유상열 ( Sang-lyul Ryu ) 한국회계학회 2016 회계저널 Vol.25 No.5

본 연구의 목적은 기업수명주기(성장기, 성숙기, 쇠퇴기)의 각 단계별로 경쟁전략이 성과의 지속성에 미치는 영향을 조사하는 것이다. 기업수명주기를 구분하기 위해 Anthony and Ramesh(1992)가 제안한 방법을 바탕으로 다섯 가지의 재무적/비재무적 지표를 활용하였다. 기업의 경쟁전략은 Porter(1980)가 제시한 원가우위전략과 차별화전략으로 구분하였으며, 요인분석을 통해 산출된 요인점수를 각 전략의 측정치로 보았다. 성과 측정치는 총자산수익률(ROA)과 영업현금흐름(CFO)이다. 2002년부터 2013년까지 국내 유가증권시장에 상장된 12월 결산법인 중 제조업을 영위하는 기업 3,400개(기업-년)를 대상으로 실증분석을 수행하였다. 주요 분석결과는 다음과 같다. 첫째, 성장기에 원가우위전략은 성과의 지속성에 음(-)의 영향을 미치는 반면, 차별화전략은 성과의 지속성에 양(+)의 영향을 미치는 것으로 나타났다. 이는 성장기의 기업은 차별화전략을 추구함으로써 지속가능한성과를 달성할 수 있음을 확인시켜주는 결과이다. 둘째, 성숙기에는 원가우위전략과 차별화전략 모두 성과의 지속성에 양(+)의 영향을 미치고 있음을 확인하였다. 셋째, 쇠퇴기에 원가우위전략은 성과의 지속성에 양(+)의 영향을 미치는 것으로 검정되었다. 이러한 결과는 일반적으로 수익성이 악화되는 쇠퇴기에도 기업이 원가우위전략을 취함으로써 지속가능한성과를 달성할 수 있음을 확인시켜 준다. 본 연구의 결과는 기업수명주기 단계별로 기업이 추구하는 전략에 차이가 있으며, 성과의 지속성과 관련된 전략유형이 서로 다름을 시사한다. 즉, 본 연구는 기업이 지속가능한 성과를 창출하기 위한 전략을 수립하기 위해서는 기업수명주기를 고려할 필요가 있다는 실증적 증거를 제시했다는 점에서 선행연구와 차별적 공헌점이 있다. This paper investigates how a firm``s competitive strategy affects its performance persistence in different life-cycle stages. We classify firms`` life-cycle into three stages (growth, maturity, and decline) using five descriptors based on Anthony and Ramesh (1992). The descriptors are (1) sales growth, (2) change in capital expenditures, (3) change in the number of employees, (4) market-to-book ratio, and (5) retained earnings. We use the Porter (1980) typology to define firms`` competitive strategies. According to this typology, two broad generic strategies are cost leadership and differentiation for achieving competitive advantages in the market place. We select five indictors from prior research to measure firms`` strategic positioning. They are (1) asset intensity, (2) total cost ratio, (3) research and development (R&D) intensity, (4) selling, general, and administrative (SG&A) expense ratio, and (5) price to book ratio. We conduct factor analysis to capture the common factors among the five indicators, to compute factor scores for each individual firm-year observation based on the factor loadings, and to use the factor scores as our measures of firms`` strategic positioning. Two performance measures are return on assets (ROA) and cash flow from operating activity (CFO). ROA is affected by accrual accounting such as depreciation methods and inventory valuation, which could have potential implications for the inferences we make regarding the persistence of performance. The cash flows of a firm are not affected by the accrual accounting. Therefore, we run our regressions using ROA and CFO to ensure that our results are not being driven by accounting choices. The sample comprises manufacturing firms listed on the Korean Stock Exchange over the period 2002-2013. Our final full sample consists of 3,400 firm-year observations. Empirical results are summarized as follows. First, for our pooled sample, the measurements of cost leadership and differentiation strategies are different across life-cycle stages. As the stage moves from the growth to the decline, the mean values of the cost leadership measure increased, while those of the differentiation measure decreased. It seems that most companies follow differentiation (or cost leadership) strategy in the growth (or decline) stage. Second, we find that both cost leadership and differentiation strategies have different impacts on performance persistence in the growth stage. More specifically, cost leadership (or differentiation) strategy has a negative (or positive) impact on the persistence of future performance. This means that the cost leadership firm is hard to achieve sustainable performance through cost advantage, on the other hands, the differentiation firm is able to create sustainable performance with the launch of new products and services, continuous innovation in the growth stage. Third, cost leadership as well as differentiation strategies have positive impacts on performance persistence in the maturity stage. Both of the strategies enable firms to achieve sustainable performance, compared to firms that focus on neither cost leadership nor differentiation. A firm pursuing cost leadership utilizes its capacity efficiently, and accomplishes the lowest-cost due to economies of scale prevailing in this stage. Economies of scale are the cost advantages that firms obtain through size or scale of operation. A company following differentiation strategy sustains its performance by brand loyalty, innovative activities, and new products based on competitiveness in R&D at the maturity stage. Fourth, we find that cost leadership strategy has a positive impact on earnings persistence (ROA) in the decline stage. Generally, firms at this stage suffer from loss and experience worsening in profitability. However, a cost leadership firm is able to sustain earnings through low-cost by utilizing existing capacity. In the other hand, a differentiation firm is not likely to create sustainable profit anymore, because its competitive technology is transferred to competitors or other firms at the decline stage. We construct firms`` life-cycle stage based on Anthony and Ramesh (1992), however, this method could have potential limitations of describing firms`` life-cycle fully. Despite these limitations, the findings gleaned from this study suggest that sustainable performance is affected by both competitive strategy and a firm``s life-cycle stage, and contribute to current knowledge on the accounting practice of Korean manufacturing firms.