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When Does Market Share Matter? New Empirical Generalizations from a

Meta-Analysis of the Market Share-Performance Relationship

Article  in  Journal of Marketing · May 2018

DOI: 10.1509/jm.16.0250

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 Alexander Edeling & Alexander Himme

When Does Market Share Matter?

New Empirical Generalizations from a
Meta-Analysis of the Market
Share–Performance Relationship
The impact of market share on financial firm performance is one of the most widely studied relationships in marketing
strategy research. However, since the meta-analysis by Szymanski, Bharadwaj, and Varadarajan (1993), substantial
environmental (e.g., digitization) and methodological (e.g., accounting for endogeneity) developments have occurred. The
current work presents an updated and extended meta-analysis based on all available 863 elasticities drawn from 89 studies
and provides the following new empirical generalizations: (1) The average raw market share–financial performance
elasticity is .132, which is substantially lower than the effectiveness of other intermediate marketing metrics. This result
challenges a widely used strategy that solely focuses on increasing market share. (2) Elasticities differ significantly
between contextual settings. For example, they are lower for business-to-business firms than for business-to-
consumer firms, for service firms than for manufacturing firms, and for U.S. markets than for emerging and Western
European markets. The authors also observe differences between countries with respect to a general time trend (e.g.,
lower elasticities in recent times for Western European markets) and recessionary periods (e.g., lower elasticities in
the United States, higher elasticities in non-Western economies).

Keywords: market share, financial firm performance, meta-analysis, elasticity, hierarchical linear model

Online Supplement: http://dx.doi.org/10.1509/jm.16.0250

hen Jack Welch became the chief executive officer business leaders regarding the financial benefits of a strategy

W (CEO) of General Electric in 1981, he announced a

very simple mantra (Tichy and Bennis 2007, p. 25):
“Be number one or number two in every market, and fix, sell or
close to get there.” In the same vein, Martin Winterkorn, the
former CEO of Volkswagen, announced that the firm’s core
aim is to become the world’s biggest carmaker (Cremer and
Funakoshi 2015). In contrast, Dan Akerson, former CEO of
General Motors, stated that the firm’s strategy would be to pick
profits over market share (Klayman 2012). Similarly, Paulo
Rogêrio Caffarelli, CEO of Banco do Brasil, declared to be
more concerned about profitability than market share trends
(Parra-Bernal and Alves 2017).
This anecdotal evidence by CEOs from different countries
and industries demonstrates a strong disagreement among
Alexander Edeling is Assistant Professor of Marketing, University of Co-
logne (email: edeling@wiso.uni-koeln.de). Alexander Himme is Associate
Professor of Management Accounting, Kühne Logistics University (email:
alexander.himme@the-klu.org). The authors appreciate comments from
the JM review team, as well as input from participants at a marketing
seminar at Simon-Kucher & Partners in 2015 and the 2016 European
Marketing Academy Conference in Oslo. The authors are also grateful to
Manuel Berkmann, Marc Fischer, Julian Hofmann, and Neil. A. Morgan for
their valuable feedback on previous versions of the article. Satish Jaya-
chandran served as area editor for this article.
that focuses on market share. Nevertheless, market share in
general is still a very important metric for top managers.
According to Farris et al. (2010), 67% of senior marketing
managers and executives regard dollar market share as a very
useful financial performance indicator.
Mirroring the attention paid to market share by practitioners,
researchers in various disciplines have aimed to understand the
nature of the relationship between market share and financial
performance for decades. Market share is conceptualized as a
business entity’s1 monetary-based or volume-based fraction of
the total market (absolute market share) or of the output of the
largest competitor/combined market share of several leading
competitors (relative market share). While the concept is,
strictly speaking, brand or product-category related, researchers
frequently apply it at the firm level by aggregating the market
shares of a company in different industries and relating this
combined measure to the total-firm financial performance (e.g.,
Connolly, Hirsch, and Hirschey 1986). Financial performance
itself can be either accounting based (e.g., return on investment
1Throughout this article, we use the term “firm” to describe
business entities, although they could also be products or business
units within firms. This is consistent with other research (e.g.,
Boulding and Staelin 1990). Indeed, the majority of studies included
in this meta-analysis (76 out of 89, or 85%) have investigated market
shares at the firm level.

© 2018, American Marketing Association Journal of Marketing

ISSN: 0022-2429 (print) Vol. 82 (May 2018), 1–24
1547-7185 (electronic) 1 DOI: 10.1509/jm.16.0250
[ROI], return on equity [ROE], return on sales [ROS]) or
financial-market based (e.g., Tobin’s q) (Katsikeas et al. 2016).
Several empirical studies using data from the profit impact
of market strategy (PIMS) project in the 1970s and 1980s (e.g.,
Buzzell and Gale 1987; Buzzell, Gale, and Sultan 1975) found
strong support for a positive linear market share–profitability
relationship. This result led to the development of doctrine-like
thinking in many companies that prioritized market share above
all other business objectives (Simon, Bilstein, and Luby 2006).
However, several streams of theoretical and empirical literature
have scrutinized the derived positive linear relationship in
various ways (e.g., Jacobson 1988)—for example, by showing
that the relationship may be nonlinear (e.g., Schwalbach 1991)
or context specific (Prescott, Kohli, and Venkatraman 1986).
Theme 1 in the Web Appendix provides an aggregate overview
of these divergent research findings.
The meta-analysis by Szymanski, Bharadwaj, and Vara-
darajan (1993; SBV hereinafter) provides the first attempt to
reconcile the different perspectives and to derive empirical
generalizations regarding direction and magnitude of the
market share–financial performance relationship. The authors
find that the mean marginal effect of market share on ac-
counting profitability is .200, indicating that, on average,
market share is in fact a significant positive driver of prof-
itability. However, empirical generalizations derived from
meta-analyses are not “a final statement of truth” (Tellis 1988,
p. 331). Now, 25 years after SBV’s meta-analysis, a new
meta-analytic assessment of the market share–performance
relationship is imperative for several reasons.
First, firms’ competitive environments have changed dra-
matically not only on a national level but also on a global level.
The digitization through the public adoption of the Internet in
1993 (CERN 2016) could have changed the influence that high
market share exerts on financial performance. Search engine
advertising and e-commerce enable small firms to advertise and
distribute their products to a global audience at very low cost
(Lituchy and Rail 2000). Regarding market conditions, glob-
alization has accelerated considerably during the past two
decades (Ghemawat and Altman 2016). Today, small and
medium-sized firms, and particularly new venture firms that
internationalize early in their life cycles, are able to shift their
production to low-cost countries or to source from such
countries (Lu and Beamish 2001). Thus, the cost and profit
advantages of large-share firms may have decreased due to a
more digitally connected global economy.
Second, management philosophy has significantly changed
during the past few decades. Most prominently, after Rappa-
port’s (1986) seminal work, top management has turned to
shareholder value–oriented thinking. Many researchers study-
ing the impact of market share on performance have replaced
backward-looking accounting performance measures of prof-
itability with forward-looking financial-market-performance
variables such as stock return or Tobin’s q (e.g., Katsikeas
et al. 2016). We include shareholder value–related variables,
which allow for investigation into whether the market share
effect on these variables differs significantly from the effect on
accounting-based profitability measures.
Third, since 1993, data and methods for estimating the
effect of market share on financial performance have increased
2 / Journal of Marketing, May 2018
in sophistication—for instance, with the use of better controls
for endogeneity and wider access to panel data through financial
databases not only in the United States, but also in many other
countries. We examine the degree to which the magnitude of the
market share–performance relationship estimate generalizes
across different empirical approaches and across foreign mar-
kets, the latter being potential future research that SBV have
identified themselves.
Against this background, we examine the average impact of
market share on financial performance based on a broad da-
tabase of 863 effect sizes (compared with 276 in SBV) from 89
studies, published between 1972 and 2017. These studies stem
from a wide range of manufacturing and service industries.2 As
effect size, we use the market share–financial performance
elasticity (i.e., the percentage change in a financial performance
variable given a 1% increase in market share). Compared with
SBV, who use marginal effects as effect size,3 dimensionless
elasticities are preferable given different operationalizations of
independent and dependent variables (Tellis 1988).
We find an average market share–financial performance
elasticity of .132, which is substantially lower than average
elasticities for brand-related and customer-related marketing
assets (Edeling and Fischer 2016). The moderator analyses
reveal that elasticities are higher for business-to-consumer
(B2C) firms than for business-to-business (B2B) firms, for
manufacturing firms than for service firms, and for emerging and
Western European markets than for U.S. markets. Further an-
alyses show relevant regional/temporal interactions: Elasticities
are lower in more recent times for Western European markets,
whereas recessions have opposing effects on elasticities in the
United States (lower than in economic upswings) and non-
Western economies (higher than in economic upswings). For
managers, these findings imply a differentiated view of the
market share construct at two different levels: (1) At the “across-
metric” level, firms should evaluate whether to shift their focus
from market share objectives (and the respective strategies and
activities) to marketing-asset objectives. (2) At the “within-
metric” level, managers should accurately analyze their en-
vironmental setting (e.g., customer type, geographic region,
economic situation) before deciding whether market share
should have a stronger or weaker stake in corporate plans and
marketing activities.
2Note that, so far, no study exists that examines the market
share–performance relationship exclusively for the digital and
Internet-provided service industry. Nevertheless, recent studies have
used broad samples of industries that are influenced by a more
digitally connected global economy (e.g., Vomberg, Homburg, and
Bornemann 2015).
3SBV (p. 2) state that the unstandardized regression coefficient
“can be interpreted as an elasticity, since both market share and
profitability are most frequently expressed as percentages.” How-
ever, the coefficient b in a linear market share (MS) model of the
form ROI (in %) = b · MS (in %) is equal to the percentage point
change in ROI given a 1-percentage-point increase in market share
(= marginal effect). For example, if the base MS is 10%, the base
ROI is 20%, and b is 1, an increase of MS by 1 percentage point (to
11%) leads to an ROI increase of 1% (to 21%). The elasticity,
however, is equal to [(21% - 20%)/20%]/[(11% - 10%)/10%] = .5,
which is only half the marginal effect of 1.
 Theoretical Framework
Theoretical Mechanisms of the Market
Share–Performance Relationship
High market share by itself does not influence financial firm
performance (e.g., Ailawadi, Farris, and Parry 1999). Previous
research has predominantly focused on mechanisms that
imply a positive relationship (e.g., Boulding and Staelin 1990).
Drawing on findings from a range of individual studies, we
discuss mechanisms that could explain both positive and
negative relationships.
Efficiency theory (EF). The most common theory pre-
sented to explain the association between market share and
financial performance is that higher-market-share firms benefit
from experience curve effects and economies of scale as well as
scope, which enable them to reduce costs (e.g., Demsetz 1973;
Gale 1972; Jacobson and Aaker 1985). The economies-of-scale
effects result from spreading fixed production and marketing
costs over more units. These cost advantages in turn act as
barriers to new competition.
However, so-called diseconomies of scale—an increase in
average unit cost when output increases—may also occur.
Multiple organizational levels between the bottom and top
usually characterize large firms (McAfee and McMillan 1995).
In such an environment, the hierarchical distance between
highly dispersed information sources and top management may
be so large that the knowledge does not diffuse to the relevant
decision makers. Zenger (1994) finds diseconomies of scale in
research and development (R&D) and concludes that they may
be present in other organizational settings in which agency
problems are severe (e.g., the sales department). In particular,
market leaders with complex organizational structures might
suffer from such size disadvantages.
Market power theory (MP). Another theory states that
large market share results in market power advantages. A large
market share may enable firms to extract concessions from
channel members and customers (Jacobson 1988)—that is, the
monopoly/monopsony position of high-share firms may enable
them to charge higher selling prices from customers and to
negotiate lower purchase prices with suppliers (Boulding and
Staelin 1990). Ailawadi, Farris, and Parry (1999) show that the
purchase-cost-to-sales ratio is a key link between market share
and profitability and that firms with high market shares are able
to develop more rewarding partnerships with suppliers.
In contrast, firms with significant market power (i.e., high-
share firms) could also run the risk of lacking organizational
aspirations. The management could perceive the establishment
of a powerful market share position as a successful achievement
by itself, which could lower the motivation to really leverage the
strong market power position or perform other profitability-
enhancing activities such as efficiency improvements. Boulding
and Staelin (1993, p. 147) term this situation “fat and happy.”
They find that only organizational units that have both the
ability and the motivation to lower costs have a chance to
benefit from market power.
Product (service) quality assessment theory (PQ). Customers
may use market share in various ways as a signal of product
quality (e.g., Hellofs and Jacobson 1999). First, in an en-
vironment of uncertainty and imperfect information about
product quality, customers derive from the widespread
acceptance of a product that it is superior in quality to lower-
share products (e.g., Caminal and Vives 1996). As a result,
high-share products can often charge a higher price than low-share
products. Prototype effects (e.g., Coca-Cola for cola products) are
closely related to such quality assessment effects. Such prototypes
have the advantage of being automatically included in consumer
consideration sets, and the willingness to pay for prototypes
is often higher than for nonprototype rivals (Amaldoss and
He 2013).
Second, for some products, consumers may derive from
large market shares that they are able to benefit from positive
network externalities (e.g., Hellofs and Jacobson 1999). Such
positive network externalities result from the direct physical
effect of the number of purchasers on the quality of the product
as well as from feedback effects (Liebowitz and Margolis 1994).
Feedback effects stem from improvements in ancillary services
(e.g., increased availability of information, wider selection of
compatible products, greater access to postsale service). Such
positive network externalities increase consumers’ willingness
to pay, and firms can charge higher prices, which in turn
positively influences their performance.
Third, consumers may incur psychological benefits from
using popular products (i.e., a bandwagon effect exists; Hellofs
and Jacobson 1999). The consumption of some products
involves a social aspect wherein customers use the product (e.g.,
mobile phones, cars, restaurants) in public. In such contexts,
consumers do not want to feel excluded and/or they derive
pleasure from using a product when more people are using
it (Becker 1991). In these conditions, a customer’s quality
judgment and willingness to pay depends positively on the
market share.
However, high market shares may also be detrimental or at
least irrelevant for consumers’ quality assessment for several
reasons. First, widespread popularity, as reflected by high
market shares, can have a negative effect on perceived quality
by reducing the image of exclusivity (Porter 1980). As a result,
low market shares can become a desirable attribute if the
purchase by a limited number of consumers signals prestige or
status (Hellofs and Jacobson 1999). This reverse of the
bandwagon effect may explain why small-market-share firms
(niche players) can also achieve high profitability, because they
are able to charge a price premium by offering exclusive
products.
Second, negative network externalities (i.e., a decrease in
the utility a user derives from a product due to its overuse [e.g.,
crowded metro trains]) are also a common consequence of
market share that is too high (Hellofs and Jacobson 1999). The
consequence of this overuse are congestion costs, which in turn
negatively influence a firm’s profitability.
Finally, market share may not be considered as a relevant
signal for quality in environments where there is little un-
certainty about product quality or when customers rely on other
indicators of product quality (Jacobson 1988). For example,
Kirmani and Rao (2000) emphasize the role of price, adver-
tising, brand equity, and customer reviews as further signals of
product quality.
When Does Market Share Matter? / 3
 FIGURE 1
Theoretical Framework

Contextual Characteristicsa Methodological Characteristics

Variable Level Variable Level Variable Level
Industry/Market Data Measurement of Variables
Product type • Manufacturing Data source • PIMS Financial performancea • ROI
(EF, PQ, MP) • Services • Non-PIMS • ROE
• Mixed • ROS
Data structure • Cross-section
• Financial market-based
Business type • B2B • Panel
(PQ) • B2C
• Mixed Market share, • Absolute
industry • Relative
Growth rate • Mean market growth
Market share, • Product/business unit
(CO) rate
organizational entity • Firm
Concentration • Mean market share Market
(MP) • Mean market share Specification/Estimation
Share–Financial
squared Performance Functional form • Linear
Regional Elasticity • Other
Endogeneity • Accounted for
Geography • United States • Not accounted for
(PQ, CO) • Europe
• Other industrialized Heterogeneity • Accounted for
countries • Not accounted for
Variable Level
• Emerging markets Estimation method • OLS
Manuscript status • Top journal • GLS
Temporal • Other journal • Other
Recession period • Percentage of • Unpublished
(EF, PQ, MP) recession months in Omitted Variables
Study focus • Market share focal
sample period • Market share control Advertising expenditures, • Included
Time trend • Mean year of data diversification, • Omitted
(EF, PQ, MP, CO) collection
Publication-Related Characteristics efficiency/inefficiency, firm
size, intangible factors, R&D
expenditures, market
concentration, market growth

a
We include these characteristics in the following subsample analysis.
Notes: Variables in italics are not included in SBV. EF = efficiency theory; PQ = product quality theory; MP = market power theory; CO = competitor-
orientation theory; OLS = ordinary least squares; GLS = generalized least squares.

Competitor orientation theory (CO). The last theory refers
to management behavior that focuses too strongly on retaining
and increasing market share as a business objective—so-called
“competitor orientation.” Such behavior can lead to excessive
concessions to customers by offering the same value at a lower
price or higher value at the same price (Simon, Bilstein, and
Luby 2006). Armstrong and Collopy (1996), using a labo-
ratory study, find that more than 40% of managers are willing
to sacrifice their companies’ own profits to harm competitors.
The authors confirm this finding in a follow-up field study in
the same article, in which they show that competitor orien-
tation and ROI are negatively correlated. Thus, the competitor
orientation theory implies that the use of market share is
detrimental to performance.
Moderating Variables Included in the Meta-Analysis
Overview. Figure 1 categorizes the moderating variables
included in the meta-analytic model into three major groups:
contextual characteristics, methodological characteristics, and
publication-related characteristics. Next to theoretical and
practical plausibility, each moderator had to occur in at least 5%
of all elasticity observations to qualify as a moderator (cutoff
value suggested by Farley, Lehmann, and Sawyer [1995]).
Within the contextual characteristics, we distinguish between
industry/market, regional, and temporal characteristics. In the
following subsections, we discuss how the previously discussed
theoretical mechanisms (EF, MP, PQ, CO) unfold under these
different conditions. We derive corresponding expectations.
The methodological characteristics encompass the data, the
measurement of market share and financial performance,
specification and estimation issues, and omitted variables.
Omitted variables are firm and market factors that are related
theoretically and statistically to both market share and firm
performance and that may bias the result if not included in the
empirical model. For brevity, we summarize the expectations
regarding all methodological and publication-related charac-
teristics in Table 1. Figure 1 and Table 1 also summarize the
operationalization of the variables (i.e., levels) and show which
of the moderating variables were not included in SBV. In total,
we examine 27 different moderating variables, of which 18
(67%) are not included in SBV.4
Product type (EF, PQ, MP). We distinguish between
samples with only pure manufacturing firms, samples with only
pure service firms, and samples that include both manufacturing
and service firms (mixed). Experience curve and efficiency
4Note that we do not use some of the moderator variables from
SBV in this study. Product line breadth, product customization,
product/service quality, product price, sales force expenditures, time
frame of measure of profit/market share (yearly vs. four-year), and
vertical integration are excluded due to very low occurrence (less
than 5% of all observations).

4 / Journal of Marketing, May 2018

 TABLE 1
Moderator Variables Used in the Meta-Analytic Model
Included in
Variable/Levels Operationalization Expected Effect on Elasticities SBV?

Contextual Characteristics
Industry/Market
Product type Indicates whether the data set No prior expectations No
• Manufacturing (base) includes only manufacturing firms,
• Services only service firms, or a mix of
• Mix of product types manufacturing and service firms.
Retailers are coded as service firms.
Business type Indicates whether the customers of B2C > B2B, Mix > B2B Yes
• B2B (base) the firms in the data set are other
• B2C businesses (B2B) or consumers
• Mix of business types (B2C), or whether both types of
business types are included in the
data set (mix).
Growth rate (metric; mean growth Market growth rate at the time of the Positive No
rate [mean-centered]) data collection. If the information is
not provided in a study, we used data
about industry gross outputs from the
Bureau of Economic Analysis
(https://www.bea.gov/) to estimate
average market growth rates.
Concentration (metric; mean market Because information about No prior expectation No
share, mean market share concentration is often not provided
squared [mean-centered]) and/or often measured in very
different dimensions (e.g., Herfindahl
index, CR2, CR4), we use the mean
market share as a proxy. Low levels of
mean market share imply a market with
many relatively small players, whereas
high levels of mean market share imply
a few large players in the market.
Regional
Geography Captures the geographic region from Emerging markets > United States No
•United States (base) which the market share data are
•Western Europe drawn. If a study uses worldwide
•Other industrialized countries data, it is coded as “other industrialized
•Emerging markets countries.” The coding as “emerging
markets” is based on either the explicit
mentioning in the study or the
classification as an emerging or
“frontier” market by MSCI (2017).
Temporal
Recession period (metric [mean- Following Sethuraman, Tellis, and Positive No
centered]) Briesch (2011), we measure
recession as the number of months
that the economy is in a recession as
a proportion of total months in the
estimation period. We take recession
data from the National Bureau of
Economic Research (2017). For the
observations for which no information
on the data period is given, the first
year of data is imputed as (Imputed
mean year of data collection – Average
data collection period/2). The last year
of data collection is computed
analogously.

When Does Market Share Matter? / 5

 TABLE 1
Continued
Included in
Variable/Levels Operationalization Expected Effect on Elasticities SBV?

Time trend (metric [mean-centered]) Mean year of data collection. The Negative No
information on data collection period
is given for 1,247 of the 1,324
marginal effects. For the 77 missing
observations, following Bijmolt, Van
Heerde, and Pieters (2005), the year
of publication minus the mean
difference between year of
publication and mean year of data
collection in all other studies (i.e.,
10.16) is imputed.
Methodological Characteristics
Data
Data source Captures whether the data are from Elasticities should be higher for PIMS Yes
• Non-PIMS (base) the PIMS project or from some other observations, because PIMS
• PIMS data source. respondents potentially overstate
their market share and PIMS firms in
general have higher market shares
and higher profits compared with
non-PIMS businesses.
Data structure Indicates whether the data are cross- The use of panel data allows for No
• Cross section (base) sectional (many individual firms at controlling for unobservable effects
• Panel a given point in time) or a panel (Greene 2012). Because several
(many individual firms over time). studies have shown that the market
share effect on profitability is lower if
unobservable effects are accounted
for (e.g., Ailawadi, Farris, and Parry
1999; Jacobson 1988), elasticities
from panel data should be lower than
those from cross-sectional data.
Measurement of Variables
Financial performance measure Indicates the type of financial No prior expectations, given that Yes (without
• ROI (base) performance measure used. We elasticity is a dimensionless measure the financial
• ROE merge financial-market-based that does not depend on the market
• ROS measures (e.g., Tobin’s q, stock operationalization of dependent and category)
• Financial-market-based return) into one group because of the independent variables.
small number of observations.
Market share, industry Captures whether market share is No prior expectations, given that Yes
• Absolute (base) measured as a fraction of the total elasticity is a dimensionless measure
• Relative market (absolute) or as a fraction of that does not depend on the
the market share of the market share operationalization of dependent and
leader/combined market share of independent variables.
leading competitors.
Market share, organizational entity Captures whether market share is Elasticities should be higher if the No
• Product/business unit measured at the product / business- organizational entity is a product/
• Firm unit level or at the overall firm level. business unit because the effect on
financial firm performance is much
more direct than in the overall-firm
case, in which aggregation of market
share can lead to a loss of
information.

6 / Journal of Marketing, May 2018

 TABLE 1
Continued
Included in
Variable/Levels Operationalization Expected Effect on Elasticities SBV?

Specification/Estimation
Functional form
• Other (base)
• Linear
Endogeneity
• Accounted for (base)
• Not accounted for
Heterogeneity
• Accounted for (base)
• Not accounted for
Estimation method
• Ordinary least squares (base)
• Generalized least squares
• Other
Omitted Variables
Advertising expenditures
• Included (base)
• Omitted
Diversification
• Included (base)
• Omitted
Firm size
• Included (base)
• Omitted
Efficiency
• Included (base)
• Omitted
Captures the functional form used for No prior expectations
the regression model. Due to low
occurrence, we merge logarithmic,
log-linear, quadratic, and cubic
functional forms into the “other”
category.
Indicates whether the model
accounts for potential endogeneity,
mostly in the form of simultaneity
(e.g., via an instrumental variables
approach).
Captures whether the model
accounts for heterogeneity.
Unobserved heterogeneity can be
accounted for through fixed effects,
random effects, random coefficients,
or latent-class models.
Captures the estimation method. No prior expectations
Weighted least squares and
multistage least squares are coded
as generalized least squares. The
“other” group comprises various
estimation methods such as
maximum likelihood, least absolute
deviation, or nonlinear least squares,
which are merged into one group
because of too few observations.
Indicates whether advertising
expenditures are included as an
independent variable in the empirical
model.
Indicates whether a diversification
variable is used as an independent
variable in the empirical model.
Indicates whether a firm-size variable
is used as an independent variable in the
empirical model. Size can refer to assets,
sales, or number of employees.
Indicates whether a measure of
efficiency (e.g., labor productivity, as
in Park, Li, and Tse 2006) is used as
an independent variable in the
empirical model.
No
Firms that are financially successful No
could be able to invest in market
share–increasing activities such as
advertising or new product
developments (Ailawadi, Farris, and
Parry 1999). If the model does not
account for such simultaneity,
elasticities will be overestimated.
Accounting for heterogeneity may No
lead to either lower or higher
elasticities, depending on the
heterogeneity pattern (Bijmolt, Van
Heerde, and Pieters 2005).
No
No prior expectations, given no clear Yes
expectations concerning the
correlations between advertising and
financial performance.
No prior expectations, given no clear No
expectations concerning the
correlations between diversification and
market share/financial performance.
No prior expectations, given no clear No
expectation concerning the
correlation between firm size and
financial performance.
No prior expectations, given that the No
relationship between market share and
efficiency can be both positive
(economies of scale, learning effects)
and negative (diseconomies of scale),
while the correlation between efficiency
and financial performance should be
positive (e.g., Demsetz 1973).

When Does Market Share Matter? / 7

 TABLE 1
Continued
Included in
Variable/Levels Operationalization Expected Effect on Elasticities SBV?

Inefficiency Indicates whether a measure of No prior expectations, given the No

• Included (base) inefficiency (e.g., Fu and Heffernan same reasoning as for the efficiency
• Omitted 2009) is used as an independent moderator variable.
variable in the empirical model.
Intangible factors (lagged financial Indicates whether the lagged Omitted > included, given expected Yes
performance) financial performance is included as positive correlations between
• Included (base) a proxy for unobservable intangible intangible factors and market share/
• Omitted factors in the empirical model. financial performance.
R&D expenditures Indicates whether R&D expenditures Omitted > included, given expected Yes
• Included (base) are included as an independent positive correlations between R&D and
• Omitted variable in the empirical model. market share/financial performance.
Market concentration Indicates whether market Omitted > included, given expected Yes
• Included (base) concentration is included as an positive correlations between
• Omitted independent variable in the empirical concentration and market share /
model (via x-firm concentration ratio financial performance.
or Herfindahl index).
Market growth Indicates whether market growth is No prior expectations, given no clear Yes
• Included (base) included as an independent variable expectations concerning the
• Omitted in the empirical model. correlations between market growth and
market share/financial performance.
Publication-Related
Characteristics
Manuscript status Indicates whether the study is Elasticities from unpublished studies No
• Published in top journal (base) unpublished or has been published in should be lower than those from
• Published in other journal a top academic journal or in another published studies because of
• Unpublished peer-review outlet. As a measure of publication bias (Rust, Lehmann, and
outlet quality, the journal ranking by Farley 1990). Within the published
the German business newspaper studies, elasticities from top-tier
Handelsblatt (2014) is used. The journals should be lower than those
ranking’s advantage over rankings from other journals because of higher
such as Erasmus Research Institute quality criteria (e.g., endogeneity),
of Management Journals List or which rather decrease effect sizes.
University of Texas at Dallas List of
Journals is that it covers both
business and economics journals.
Only journals that receive the top two
evaluations (.7 and 1) are coded as
top journals, which make up 7.6% of
all journals listed in the ranking.
Study focus Captures whether market share is Apart from a handful of exceptions No
• Market share focal (base) used as the (or one of several) focal (e.g., Jacobson and Aaker 1985), the
• Market share control variable(s) or as a control variable. main contribution of studies focusing
on market share is to determine its
large and statistically significant
effect on financial performance.
Thus, elasticities from studies that
use market share as a control
variable should be lower than those
from studies that use it as a focal
construct.

effects (EF) are more prevalent in manufacturing than in service
industries because of the high levels of value added, continuous
process manufacturing, and high capital intensity (Jacobson and
Aaker 1985). Services are characterized by intangibility, het-
erogeneity, inseparability of production and consumption, and
perishability (Zeithaml, Parasuraman, and Berry 1985). Thus,
services are more difficult to standardize than tangible goods,
which makes the exploitation of economies of scale more
difficult. If present, diseconomies of scale arising from longer
hierarchies are likely to affect both manufacturing and service

8 / Journal of Marketing, May 2018

firms. Product-quality assessment effects (PQ) also play a role.
Services are mainly experience and credence goods, for which
customers cannot reliably evaluate quality before purchase
(Nelson 1973). Positive quality assessment effects of a high
market share might thus be more relevant for services than for
physical goods. Similarly, network effects (both positive and
negative) are more likely to occur for services than for physical
goods. Regarding market power (MP), purchase costs are more
relevant for manufacturing than service industries because of
the larger extent of raw materials needed from suppliers in the
production process (Schwalbach 1991). Because the purchase-
cost-to-sales ratio represents a key link between market share
and performance (Ailawadi, Farris, and Parry 1999),
manufacturing firms are better able to reap the full benefits of
market share by for example negotiating better supplier dis-
counts. Taken together, the efficiency (EF) and market power
(MP) theories speak in favor of a higher market share–
performance elasticity in manufacturing samples, while the
product quality assessment theory (PQ) supports a higher
market share–performance elasticity in service industries.
Given these conflicting arguments, we do not formulate an a
priori expectation concerning this moderator.
Business type (PQ). Samples used in the primary studies
comprise B2C firms, B2B firms, or both types of firms together
(mixed). Consumers are more inclined to use market share as a
product quality assessment signal (PQ) in their buying decisions
than organizational customers, given the highly formalized
and extensive purchase-decision process in the B2B context
(Webster and Wind 1972). Although negative quality transfers
from high market share can also exist (see the previous dis-
cussion), positive quality effects are likely to dominate. Thus,
we expect the market share elasticity to be highest for pure B2C,
moderate for mixed samples, and lowest for pure B2B samples.
Market growth rate (CO). The growth of an industry at the
time at which a study was set may also influence market
share–financial performance elasticities. In mature markets
where “primary demand” is generally fixed, firms can increase
their sales only from “secondary demand” (i.e., by growing own
market share only at the expense of the competitors; Fischer and
Albers 2010). This could result in firms being inclined to
overprioritize market share as a business objective and activities
such as price wars that deteriorate profitability (Van Heerde,
Gijsbrechts, and Pauwels 2008). In contrast, firms competing in
less mature markets can increase their market share by growing
faster than competitors, which does not necessarily require
aggressive competitive behavior. Taken together, we expect that
the higher the growth rate of the industry investigated in a study,
the higher the market share elasticity.
Market concentration (MP). We measure concentration
as the mean market share for a given sample, with a high mean
market share indicating a low number of competitors and,
thus, a high level of concentration (for a similar operationali-
zation, see You, Vadakkepatt, and Joshi [2015]). We use this
measure instead of traditional concentration metrics because the
primary studies have reported different concentration indexes
(e.g., Herfindahl, concentration ratios [CR] 2/3/4/10), which
make comparisons unfeasible. Theoretical arguments speak in
favor of a positive effect of concentration on market share–
financial performance elasticities, because market leaders
should benefit particularly strongly from the collusive envi-
ronment in terms of a better bargaining position (MP) toward
customers and suppliers (Gale 1972). However, the empirical
findings from Uslay, Altintig, and Winsor (2010) suggest that
there could also be a nonlinear effect of concentration, with the
highest market share performance effect for medium levels of
concentration. The theoretical explanation could be that such
markets are further away from an equilibrium state than markets
with very many or very few competitors, and market partici-
pants benefit (suffer) more strongly from market share gains
(losses). We account for such possible nonlinearities by in-
cluding both the linear and the squared terms of mean market
share but do not offer an expectation concerning the sign of the
corresponding estimates.
Geography (PQ, CO). We distinguish between samples
that use data purely from the United States, Western Europe,
other industrialized countries, and emerging markets. The
impact of market share on performance may be different be-
tween these regions not only because of diverging market
maturity levels but also because of different cultures. Hofstede
(2003) shows that country populations differ in their value
systems.
High growth rates and dynamic industries characterize so-
called “emerging markets” such as China or Mexico (Sheth
2011). Consequently, the arguments used with respect to market
growth rates also work in this context. In more mature markets
such as the United States, firms are more competitor oriented
(CO), while firms competing in emerging markets are able to
increase their market share by growing faster than competitors
(Sheth 2011), which does not necessarily require aggressive
competitive behavior. From a cultural perspective, people from
the United States score highly on the cultural dimension of
masculinity, which characterizes a society that is driven by
competition and success (Hofstede 2003; Stremersch and
Lemmens 2009). Thus, U.S. managers may be, on average,
more competitor oriented than their non-U.S. counterparts.
Buyers in emerging markets are also less experienced and
informed than those in industrialized countries (Atsmon,
Kuentz, and Seong 2012; Sheth 2011), implying that they rely
more on market shares as a quality signal (PQ). In addition,
compared with many other countries, the United States shows a
very low level of uncertainty avoidance (i.e., U.S. consumers
more easily accept new ideas and innovative products and
have a high willingness to try something new or different; e.g.,
Stremersch and Lemmens 2009). Thus, for U.S. consumers,
market share may play a less prominent role to avoid uncertainty
in purchase decisions. Taken together, we expect lower elas-
ticities in the United States than in emerging markets.
Recession period (EF, PQ, MP). One of our temporal
moderators measures recession (i.e., the number of months that
the economy is in a recession as a proportion of total months in
the studies’ sample period; Sethuraman, Tellis, and Briesch
2011). Large-share firms benefit from relatively low total unit
costs as a result of economies of scale and the experience curve
(EF)—that is, lowering prices during recessions is less harmful
for large-share firms than for their smaller competitors. In
When Does Market Share Matter? / 9
addition, because of their market power (MP), large-share firms
might be able to get through recessions more easily than their
small-share counterparts (e.g., by extracting concessions from
suppliers more easily; Jacobson 1988). With respect to the
product quality assessment theory (PQ), two different con-
sumption patterns emerge during recessions. On the one hand,
some consumers turn to lower-priced, low-share products (e.g.,
private labels) because they can no longer afford or are no
longer willing to buy the more expensive, high-share products
(Lamey et al. 2007). On the other hand, some consumers might
have lower confidence during recessions and thus rely partic-
ularly strongly on the credibility provided by strong, high-share
brands (Ou et al. 2014). Taken together, while the product
quality assessment theory (PQ) gives us no unambiguous in-
dication, the market power and efficiency theories (MP, EF)
support a positive relationship between recession and the market
share–performance elasticity. Thus, in total, we expect a positive
effect of recessionary periods.
Time trend (EF, PQ, MP, CO). As the second temporal
characteristic, we consider the mean year of data collection.
Several arguments exist as to why market share–financial
performance elasticities should become smaller over time. First,
markets in general have matured, and competition has in-
tensified considerably over the past 50 years (Sethuraman,
Tellis, and Briesch 2011). At the same time, improvements in
information systems (e.g., use of scanner data) have made it
possible to receive competitor-oriented information (i.e., market
share) in a much more timely, detailed, and cost-effective
manner. This should have led to a stronger competitor orien-
tation (CO) within firms, which goes along with sacrificing
profits for the sake of taking market shares from industry rivals
(Armstrong and Collopy 1996).
Second, the rise of the Internet during the past two decades
could have weakened the scale advantages of large firms (EF).
Firms of all sizes are now able to advertise and distribute their
products at far lower costs than in the post-Internet era (Gandhi,
Khanna, and Ramaswamy 2016).5 Niche products that were not
in stock at traditional brick-and-mortar retailers are now
available online. They might find their way to consumers,
who were not aware of their existence, through sophisticated
search and recommendation algorithms (Brynjolfsson, Hu, and
Simester 2011) that are often processed on B2C or B2B
e-commerce platforms (Chakravarty, Kumar, and Grewal 2014).
In addition, online product review sites allow for high
5We refer here to firms in traditional markets (e.g., consumer
goods) that use the Internet as a marketing and distribution channel.
However, pure Internet firms such as Google, YouTube, or Netflix
offer information goods online. For such goods, a strong correlation
between market leadership and profitability can be expected because
of product quality (Jones and Mendelson 2011) and network (Nair,
Wierman, and Zwart 2016) effects (PQ). Further complexity is
introduced by online platform firms such as Airbnb with two types of
agents (i.e., buyers and sellers), in which both direct and cross-
network effects exist (Chakravarty, Kumar, and Grewal 2014).
Because the primary studies used in this meta-analysis have pre-
dominantly focused on firms from traditional markets that might sell
their products online (e.g., through their own websites or online
retailers), these opposing information economy effects should not
alter the results.
10 / Journal of Marketing, May 2018
transparency concerning product quality (PQ). This transparency
renders the quality assessment advantages of high-share brands
less relevant (Chen and Xie 2008).
Third, in a more globalized world, small-share firms are
increasingly able to reap the advantages of worldwide sourcing,
production, and distribution that used to be reserved for industry
leaders that were able to exhibit their market power (MP) to
extract concessions from channel members (Lu and Beamish
2001). From these three arguments, we expect market share–
financial performance elasticities to be smaller in more recent
years.
Methodology
Scope of Study
A study had to meet the following criteria to be incorporated in
the meta-analytic database: First, the study must include an
econometric regression model. We do not consider results based
on descriptive statistics (e.g., Buzzell, Gale, and Sultan 1975),
correlation analyses (e.g., Thietart and Vivas 1984), or structural
equation (path) modeling (e.g., Annacker and Hildebrandt
2004) (elimination of 16 studies). Second, the dependent
variable must be a relative financial performance variable,
either accounting based (ROI, ROE, ROS) or financial
market based (Tobin’s q, stock return). This condition ex-
cludes studies using absolute profit measures (e.g., Hofer
et al. 2012) (elimination of seven studies). Third, the market
share variable must measure either the absolute share
(compared with the total market) or the relative share
(compared with the market share of the market share leader or
the combined market share of several leading competitors).
Fourth, both the dependent and independent variables must
be ratio scaled, which excludes cases in which a variable is
categorical (e.g., market leader dummy in Hambrick [1983])
or interval (e.g., based on a Likert scale, as in Zou and
Cavusgil [2002]) (elimination of nine studies).
Database Compilation
We applied the following research procedure: First, we tried to
retrieve the studies included in SBV (the authors provided
author names and years but not titles or outlets in their Table 1
[p. 3], which aggravates literature search considerably). Only 14
of the 48 studies that SBV use enter the elasticity data set for the
following reasons (for details, see Theme 2 in the Web Ap-
pendix). In four cases, the original study could not be retrieved
using online databases (Google Scholar, ProQuest Dissertation,
SSRN) or author requests. In another five cases, the studies do
not fit our (and in fact, also SBV’s) inclusion criteria (e.g.,
market share is included as a binary variable [market leader vs.
nonmarket leader] in Hambrick [1983]). Of the 39 remaining
studies, an elasticity calculation is possible for only 14 papers
because the necessary descriptive information to calculate
elasticities (i.e., mean values of financial performance and
market share variable) was not provided.6
6For elasticity calculation procedures for frequently used model
specifications, see Kremer et al. (2008, p. 236).
 Next, we searched for relevant studies using a backward
search of all papers citing the SBV meta-analysis. This was
followed by a keyword search (e.g., “market share & profit-
ability,” “market share & performance”) in the aforementioned
online databases. Afterward, we did a manual interdisciplinary
search across leading management, marketing, finance, ac-
counting, information systems, and economics journals.7 Fi-
nally, we searched the references of all identified papers to
gather further relevant work.
Database Scope
After applying the exclusion criteria, the full database covers
147 studies (39 studies from SBV and 108 additional studies),
contributing 1,324 marginal effects of market share on financial
firm performance. We included marginal effects for the sake of
completeness and to allow for comparisons with elasticities (see
the “Additional Analyses and Robustness Checks” subsection).
However, an elasticity calculation was possible for only 91
studies. For all other studies, necessary descriptive information
to calculate elasticities was neither given in the studies nor
provided by the studies’ authors upon request. These 91 studies
yield 878 market share–financial performance elasticities. We
excluded 15 elasticities that lie outside the interval of the mean
elasticity plus or minus three times the standard deviation
(Bijmolt, Van Heerde, and Pieters 2005), leading to a final
sample of 863 effect sizes. These elasticities stem from 89
studies published or written (working papers) between 1972
and 2017 that use data spanning from 1949 to 2013, from six
continents (Africa, Asia, Australia, Europe, North America,
and South America). Fifty-four percent of these elasticities
stem from studies that focus on a single industry. The Web
Appendix provides further details: Theme 3 lists all 181 studies
that we considered for inclusion, Theme 4 shows the steps for
obtaining the final data set, and Theme 5 provides detailed
information about the 91 studies from which we obtained
elasticity estimates.
Data Coding
After we identified the 147 potentially relevant studies, the first
author classified the characteristics of the studies using a
comprehensive coding guide (Cooper 2010). To minimize the
risk of wrong coding as a result of a subjective misinterpretation
by a single coder (Stanley et al. 2013), a well-trained Master’s of
7Specifically, we reviewed the following leading journals:
Academy of Management Journal, Academy of Management Re-
view, Administrative Science Quarterly, Journal of Business Re-
search, Journal of International Business Studies, Management
Science, Strategic Management Journal, International Journal of
Research in Marketing, Journal of Marketing, Journal of Marketing
Research, Journal of Retailing, Journal of Service Research,
Journal of the Academy of Marketing Science, Marketing Letters,
Marketing Science, Journal of Finance, Journal of Financial
Economics, Review of Financial Studies, Accounting Review,
Journal of Accounting and Economics, Journal of Accounting
Research, Information Systems Research, Management Information
Systems Quarterly, American Economic Review, Economica,
Journal of Industrial Economics, Journal of Law and Economics,
Journal of Political Economy, Quarterly Journal of Economics,
Rand Journal of Economics, Review of Economics and Statistics.
Business Administration student coded a random sample of 56
studies. Coding agreement was greater than 90%, and the
remaining inconsistencies were resolved through discussion. To
increase coding transparency, we present the elasticity calcu-
lation procedures for each paper and the meta-analytic database
including all 1,324 marginal effects in the additional supple-
mental online material.
Meta-Analytic Model and Estimation
Following Bijmolt and Pieters (2001) and the procedure in
various other marketing meta-analyses (e.g., Sethuraman,
Tellis, and Briesch 2011), we model the elasticity as a function
of the selected independent variables using hierarchical linear
modeling (HLM). We present the details about the model
specification in Theme 6 in the Web Appendix.
In addition, to account for the fact that market share–
financial performance elasticities are not true parameters but
estimated with error (Sethuraman, Tellis, and Briesch 2011), we
weight each observation with a normed variance (i.e., the ab-
solute value of the ratio of the estimated elasticity and its
standard error; Edeling and Fischer 2016). Because information
on statistical significance (standard errors, t-values) and on the
mean market share within a sample (one of the moderators) is
not available for all observations, this slightly reduces the
overall sample used for the multivariate regression analysis to
829 elasticities based on 85 studies.
Results
Descriptive Analyses
Univariate statistics. Theme 7 in the Web Appendix
presents the frequency distribution of the market share–financial
performance elasticities for the overall sample, and Figure 2
shows descriptive statistics for the overall sample and various
subgroups. The 863 elasticities range from –.615 to .999. The
mean elasticity of .132 is significantly positive (p < .01). The
median elasticity is substantially lower at .043. More than 45%
of the elasticities lie between 0 and .10, and approximately 18%
of the elasticities are negative. These negative elasticities
indicate that the detrimental mechanisms of the market
share–performance relationship seem to prevail occasionally.
Following Tellis’ (1988) procedure, the number of zero
observations that is needed to obtain an insignificant mean
elasticity (fail-safe n) amounts to 99,446.
Model-free evidence. Theme 8 in the Web Appendix
presents information about the distribution of observations
across variable levels, and Theme 9 in the Web Appendix
shows the correlations between all variables (both for all ob-
servations used in the HLM [n = 829]). In total, 26 mean-
difference tests turn out to be significant (p < .10). However,
these mean-difference analyses do not account for (1) the
correlations among the variables, (2) the nesting of elasticity
measurements within studies, and (3) the precision of the
elasticity estimate. The weighted HLM results discussed in the
next subsection incorporate these characteristics and are thus
the basis for further interpretations.
When Does Market Share Matter? / 11
 FIGURE 2
Means and Other Descriptive Elasticity Information for Full Sample and Subgroups

.400 .373
Mean Elasticity .350
.300
.243
.250 .209
.200 .175
.132 .136 .143 .128
.150 .116 .126
.107 .102
.100 .077 .085

.050
.000
Product Type Business Type Geographical Region Financial Performance Measure
B2B Other Emer-
Full Manufac- and Western Industri- ging Financial
Sample turing Services B2C B2B B2C US Europe alized markets ROI ROE ROS Market
Na 863 265 417 709 55 99 504 110 143 106 437 219 104 103
t-valueb 17.74 13.70 9.75 14.07 12.06 7.44 13.27 10.50 6.07 4.90 12.34 11.41 5.22 5.84
SD .219 .249 .162 .203 .229 .235 .197 .243 .267 .179 .242 .163 .250 .177
Median .043 .119 .024 .029 .407 .117 .034 .243 .028 .045 .037 .051 .046 .027
Min –.615 –.505 –.485 –.615 –.505 –.127 –.615 –.129 –.505 –.152 –.485 –.092 –.615 –.094
Max .999 .993 .999 .999 .973 .993 .993 .973 .924 .999 .993 .999 .814 .741

We exclude 15 observations with elasticity estimates larger/smaller than –3 standard deviations.

a
b
All means are significantly different from zero at the 1% level (two-sided test).

HLM Results share in service industries is particularly pronounced for firms

that serve both consumers and business customers (such as
Table 2 presents the maximum likelihood estimation results of
banks; bMix = –.160, p < .01) and for firms in the United States
the overall HLM and separate HLMs for the subsamples (1)
(bU.S. = –.269, p < .01).
manufacturing firms, (2) service firms, (3) mixed business type,
In accordance with our expectations, business type affects
(4) only B2B, (5) only B2C, (6) United States, (7) Western
market share–financial performance elasticities. Elasticities are
Europe, (8) other industrialized countries, (9) emerging mar-
significantly higher if the data set contains only B2C firms (bO =
kets, (10) ROI, (11) ROE, (12) ROS, and (13) financial
.220, p < .01) or both B2C and B2B firms (bO = .132, p < .01)
market–based performance. This moderated-moderation ap-
than if the data set is purely B2B. Possibly, the elaborate buying
proach (for a similar procedure, see Rosario et al. [2016]) allows
process of organizational customers weakens the role of market
for more nuanced insights regarding the question of when and
share as a product quality criterion. Producers of tangible
how market share affects financial performance. For these
consumer goods, however, benefit particularly strongly from a
subsample analyses, we focus on a subset of managerially
strong market position (bManu = .245, p < .01).
relevant moderators as independent variables, which also helps
The mean market growth rate does not significantly affect
overcome multicollinearity problems that would arise if these
elasticities for the overall sample. The subsample analysis
subsample analyses were conducted with the total set of
shows that the mean market growth rate moderates the market
moderators. In addition, as a minimum requirement for gen-
share–performance effect negatively in other industrialized
eralization, we include only variables with more than seven
regions (bOI = –3.533, p < .05) and if performance is measured
observations stemming from at least three studies (Farley,
using ROS (bROS = –2.509, p < .01) or financial market–based
Lehmann, and Sawyer 1995; Rosario et al. 2016). Theme 10 in
metrics (bFM = –1.206, p < .05). These unexpected results in
the Web Appendix presents the number of elasticities and
some contexts could occur as a result of switching cost
studies for the subsample analysis. Model fit for the overall and
for customers of market leaders in mature industries
the subsample models as indicated by pseudo R2 (squared
(e.g., higher familiarity, larger distribution network) and,
correlation between estimated and actual dependent variable) is
thus, a higher customer loyalty that results in economic
satisfactory (at least .604).
benefits.
Industry/market characteristics. Overall, market share– The moderator mean market share exerts an inverted
financial performance elasticities are significantly lower for U-shaped effect on the market share effectiveness (linear bO =
service firms (see the coefficient bO = –.067 for the overall 1.025, p < .01; squared bO = –4.501, p < .01), implying that
model in the fourth column of Table 2, p < .10) and mixed firms in markets with a moderate number of competitors benefit
product type (bO = –.083, p < .01) samples compared with pure more from market share gains than those active in weakly
manufacturing firm samples. The lower effectiveness of market or highly concentrated industries. Such a nonmonotonic

12 / Journal of Marketing, May 2018

 TABLE 2
Hierarchical Linear Model Results
A: Overall and by Product and Business Types
Overall Manufacturing Services B2B and B2C B2B B2C
Expected
Variable Level Sign bO (SE) bManu (SE) bServ (SE) bMix (SE) bB2B (SE) bB2C (SE)

Intercept .234 (.125)* .180 (.068)** .405 (.183)** .346 (.037)*** .453 (.136)*** .466 (.091)***
Contextual Characteristics
Industry/Market
Product type Manufacturing Base
Services -/+ –.067 (.037)* –.160 (.043)*** LONa –.015 (.076)
Mix of product types -/+ –.083 (.028)*** –.118 (.029)*** LONa –.315 (.142)**
Business type B2B Base
B2C + .220 (.035)*** .245 (.037)*** –.085 (.185)
Mix of business types + .132 (.028)*** .148 (.030)*** –.252 (.174)
Growth rate Mean market growth + –.129 (.182) .386 (.477) –.225 (.245) –.083 (.191) –.095 (.821) 1.237 (1.512)
rate
Concentration Mean market share –/+ 1.025 (.187)*** 1.789 (.258)*** 1.307 (.283)*** 1.441 (.177)*** .181 (1.038) 1.303 (.467)**
Mean market share –/+ -4.501 (1.109)*** -10.340 (1.990)*** -5.288 (1.600)*** -5.581 (1.149)*** -2.719 (7.269) -10.959 (3.013)***
squared
Regional
Geography United States Base
Western Europe -/+ .148 (.041)*** .095 (.093) .159 (.109) .136 (.045)*** MCc LONa
Other industrialized -/+ –.002 (.037) .019 (.087) .147 (.115) –.009 (.041) –.227 (.207) LSNb
countries
Emerging markets + .152 (.049)*** .134 (.108) .157 (.078)** .083 (.050)* LONa LONa
Temporal
Recession Months of recession + –.063 (.040) –.041 (.125) –.047 (.049) –.080 (.041)** MCc –.008 (.403)
Time Mean year of data - .002 (.002) –.002 (.003) .004 (.004) –.000 (.002) –.002 (.009) MCc
collection
Methodological Characteristics
Data
Data source Non-PIMS Base
PIMS + .227 (.079)***
Data structure Cross section Base
Panel - –.030 (.037)
Measurement of Variables
Financial performance ROI Base
ROE -/+ .039 (.009)*** –.045 (.032) .045 (.010)*** .045 (.010)*** LONa –.067 (.036)*
ROS -/+ –.054 (.021)*** –.053 (.025)** LONa –.055 (.025)** –.035 (.045) –.200 (.095)**
Financial-market-based -/+ –.067 (.037)* .018 (.087) LONa –.072 (.035)** LONa –.101 (.159)

When Does Market Share Matter? / 13

 TABLE 2
Continued
A: Overall and by Product and Business Types
Overall Manufacturing Services B2B and B2C B2B B2C
Expected
Variable Level Sign bO (SE) bManu (SE) bServ (SE) bMix (SE) bB2B (SE) bB2C (SE)

Market share, industry Absolute Base

Relative -/+ –.192 (.100)*
Market share, organizational Product / business unit Base
entity Firm - .090 (.080)
Specification/Estimation

14 / Journal of Marketing, May 2018

Functional form Other Base
Linear -/+ –.037 (.025)
Endogeneity Accounted for Base
Not accounted for + .079 (.032)**
Heterogeneity Accounted for Base
Not accounted for + –.062 (.025)**
Estimation method Ordinary least squares Base
Generalized least -/+ –.021 (.023)
squares
Other -/+ –.117 (.040)***
Omitted Variables
Advertising expenditures Included Base
Omitted -/+ –.010 (.042)
Diversification Accounted for Base
Not accounted for -/+ –.073 (.047)
Efficiency Accounted for Base
Not accounted for -/+ .013 (.020)
Inefficiency Accounted for Base
Not accounted for -/+ –.004 (.012)
Firm size Included Base
Omitted -/+ .057 (.037)
Intangible factors Included Base
Omitted + –.047 (.073)
R&D expenditures Included Base
Omitted + .056 (.055)
Market concentration Included Base
Omitted + .017 (.019)
Market growth Included Base
Omitted -/+ .004 (.012)
Publication-Related Characteristics
Manuscript status Published in top journal Base
Published in other + –.120 (.049)**
journal
Unpublished - –.246 (.071)***
Focus of study Market share focal
variable
Market share control – –.157 (.053)***
variable
 TABLE 2
Continued
A: Overall and by Product and Business Types
Overall Manufacturing Services B2B and B2C B2B B2C
Expected
O Manu Serv Mix B2B B2C
Variable Level Sign b (SE) b (SE) b (SE) b (SE) b (SE) b (SE)

N (observations/studies) 829/85 258/37 403/26 678/69 55/9 96/15

Pseudo R2 .671 .846 .477 .623 .792 .709
Max. VIF 6.872 5.682 4.150 3.202 2.845 3.583

B: By Regions and Performance Variables

Other Industrialized Emerging Financial-
United States Western Europe Countries Markets ROI ROE ROS Market-Based
Variable Level bU.S. (SE) bWE (SE) bOI (SE) bEM (SE) bROI (SE) bROE (SE) bROS (SE) bFM (SE)

Intercept .281 (.044)*** .537 (.093)*** .245 (.092)** 1.332 (.353)*** .176 (.058)*** .300 (.087)*** .217 (.055)*** .398 (.099)***
Contextual Characteristics
Industry/Market
Product type Manufacturing
Services –.269 (.051)*** MCc .151 (.098) .209 (.142) –.101 (.052)* –.097 (.113) LONa LONa
Mix of product types –.114 (.028)*** MCc .116 (.080) .190 (.201) –.093 (.043)** –.080 (.137) –.038 (.041) .013 (.048)
Business type B2B
B2C –.006 (.073) LONa LSNb LONa .264 (.043)*** MCc –.024 (.091) –.008 (.057)
Mix of business .143 (.030)*** –.071 (.068) –.130 (.089) –.674 (.219)*** .155 (.046)*** –.031 (.073) .139 (.047)*** MCa
types
Growth rate Mean market –.095 (.182) –.047 (1.098) -3.533 (1.515)** .664 (1.023) .071 (.283) –.131 (.223) -2.509 (.727)*** -1.206 (.573)**
growth rate
Concentration Mean market share 1.399 (.217)*** .928 (.274)*** MCc MCc 1.320 (.249)*** 1.810 (.369)*** 1.414 (.263)*** 1.342 (.381)
Mean market share -6.406 (1.238)*** -3.147 (3.009) MCc MCc -5.887 (1.405)*** -11.238 (3.287)*** 6.292 (3.089)** 14.817 (4.920)***
squared
Regional
Geographic United States
region Western Europe .154 (.054)*** .468 (.142)*** –.128 (.061)** LONa
Other industrialized .009 (.049) .314 (.156)* –.445 (.074)*** –.078 (.055)
countries
Emerging markets .081 (.082) .354 (.102)*** –.388 (.088)*** LONa
Temporal
Recession Months of –.066 (.037)* –.127 (.185) 2.304 (.853)** 2.760 (1.124)** –.057 (.074) –.083 (.038)** –.101 (.255) –.164 (.083)*
recession
Time Mean year of data .002 (.002) –.020 (.004)*** .002 (.008) –.053 (.015)*** .002 (.003) MCc .005 (.004) –.009 (.002)***
collection

When Does Market Share Matter? / 15

 TABLE 2
Continued
B: By Regions and Performance Variables
Other Industrialized Emerging Financial-

16 / Journal of Marketing, May 2018

United States Western Europe Countries Markets ROI ROE ROS Market-Based
ROI ROE ROS
Variable Level bU.S. (SE) bWE (SE) bOI (SE) bEM (SE) b (SE) b (SE) b (SE) bFM (SE)

Methodological Characteristics
Financial ROI
performance ROE .023 (.009)** .047 (.032) .107 (.040)*** –.038 (.037)
ROS –.000 (.020) –.469 (.061)*** –.143 (.124) .292 (.198)
Financial-market- –.150 (.040)*** LONa –.108 (.121) LONa
based
N(observations/ 491/47 106/12 138/14 94/17 425/50 215/23 104/20 85/23
studies)
Pseudo R2 .681 .604 .686 .648 .676 .627 .653 .931
Max. VIF 9.852 9.468 5.482 9.444 4.771 8.222 8.294 6.878

*p < .10.
**p < .05.
***p < .01.
aLow observation number. Variable was eliminated due to very low occurrence (fewer than seven elasticity observations).
bLow study number. Variable was eliminated due to very low number of studies that investigated the effect (fewer than three studies).
cVariable was eliminated due to excessive multicollinearity (VIF > 10).
Notes: n.s. = not significant (p > .10). Observations were weighted by the absolute value of the ratio of elasticity and standard error. A two-sided test was used. Expected sign: + = positive relationship
(compared with base level); - = negative relationship; –/+ = ambiguous relationship. We concentrate on a limited set of moderators for the subsample analyses.
relationship also emerges in the subsamples manufacturing
firms (linear bManu = 1.789, p < .01; squared bManu = –10.340,
p < .01), service firms (linear bServ = 1.307, p < .01; squared
bServ = –5.288, p < .01), mixed business-type firms (linear
bMix = 1.441, p < .01; squared bMix = –5.581, p < .01), B2C
(linear bB2C = 1.303, p < .05; squared bB2C = –10.959,
p < .01), and U.S. firms (linear bU.S. = 1.399, p < .01; squared
bU.S. = –6.406, p < .01).
Regional characteristics. Market share–financial perfor-
mance effects also differ across regional markets. Consistent
with the expectation, elasticities are significantly higher in
emerging markets than in the United States (bO = .152, p < .01)
for the overall sample, and, in particular, for service firms
(bServ = .157, p < .05) and for mixed business-type samples
(bMix = .083, p < .10). Elasticities in Western European
countries are also significantly higher than those from the
United States (bO = .148, p < .01).
Temporal characteristics. The percentage of recessionary
months within the data period does not significantly affect
elasticities overall. However, the subsample analyses reveal that
market share is less effective during recessionary periods in
mixed business-type contexts (bMix = –.080, p < .05) and in the
United States (bU.S. = –.066, p < .10), whereas the effect is
reversed in other industrialized (bOI = 2.304, p < .05) and
emerging (bEM = 2.760, p < .05) markets. These mixed results
could indicate that the mechanisms efficiency and market power
are more pronounced in non-Western environments, while the
mechanism product quality has a stronger effect for mixed
business types.
The overall results do not support the expected negative
time trend. However, this effect emerges for Western Europe
(bWE = –.020, p < .01) and for emerging markets (bEM = –.053,
p < .01). Note that the time variable mean year of data collection
is continuous in the main model. In a subsequent section, we
elaborate on temporal patterns in the market share–financial
performance relationship.
Methodological characteristics. With respect to data
characteristics, the results strongly support the arguments and
findings from previous studies that market share effects based
on the PIMS project are positively biased (bO = .227, p < .01).
The operationalization of financial performance matters.
Overall, elasticities are significantly higher (compared with the
ROI reference) if performance is measured using ROE (bO =
.039, p < .01) and significantly lower if ROS is the dependent
variable (bO = –.054, p < .01). These results hold true for the
subsample analyses except for the B2C sample, in which the
market share elasticity is marginally significantly lower when
ROE is used (bB2C = –.067, p < .10). We caution against
deriving managerial implications from these mixed empirical
findings because, from a formal point of view, market share
elasticities should not systematically differ between different
accounting measures (for a derivation, see Theme 11 in the
Web Appendix). A more substantial finding, however, is the
significantly lower elasticity if market value–based variables
such as stock return or Tobin’s q are used instead of the
accounting-based ROI (bO = –.067, p < .10). The investment
influence of market share seems to have weakened over time,
as shown by the time coefficient in the respective subsample
analysis (bFM = –.009, p < .01).
Elasticities are significantly lower if market share is mea-
sured in relative terms as opposed to absolute terms (bO = –.192,
p < .10). We find no significant difference between elasticities of
firm versus business-unit market share measurements, which
refutes the expectation that the aggregation of market share
information at the firm level leads to more noise and, thus, lower
elasticities.
Among specification and estimation moderators, we find
that not accounting for endogeneity leads to significantly higher
elasticities (bO = .079, p < .05), in support of the expectation that
substantial feedback effects between financial performance and
market share exist. In addition, not accounting for firm-specific
heterogeneity leads to significantly lower elasticities (bO =
–.062, p < .05), as does the use of estimation approaches other
than ordinary least squares (bO = –.117, p < .01). Omitting firm-
or industry-specific variables from the market share–financial
performance model does not significantly affect elasticities.
Publication-specific characteristics. Effects from un-
published studies are significantly lower than elasticities from
top journals (bO = –.246, p < .01). Thus, the market share–
financial performance literature seems to suffer from a publi-
cation bias. In addition, elasticities from papers in less prestigious
scientific journals are significantly lower than those from papers
in top-tier journals (bO = –.120, p < .05), which runs counter to
the argument that the high-quality requirements of the latter
journals lead to a decrease in effect sizes. Finally, as expected,
elasticities from models in which market share is treated as a
control variable are significantly lower than those from models in
which they are treated as a focal construct (bO = –.157, p < .01).
Additional Analyses and Robustness Checks
Influence of digitization on elasticity. We conducted
several tests to further explore the effect of digitization on
the market share–financial performance effect. First, we
substituted a variable that measures digitization8 for the time
effect. However, the variable was nonsignificant. Second, fol-
lowing Kayande and Bhargava (1994), we substituted a binary
time variable that measures whether the mean year of data
collection is before (0) or after (1) 1993 for the metric time
variable. The publication year of SBV and the start of public use
of the Internet both occurred in 1993. The coefficient of this
dummy variable is insignificant in the overall sample. However,
when included in the manufacturing subsample, the coefficient
of the post-1993 dummy is significantly negative (bManu = –.228,
p < .05), implying that market share has lost some of its financial
performance effect for tangible goods in the Internet era. In
the service firms subsample, the coefficient is insignificant.
To receive more specific insights regarding the effect of
digitization, we used the results from the recent study by
Gandhi, Khanna, and Ramaswamy (2016) to categorize in-
dustries as moderately (reference category), weakly, and highly
influenced by digitization. Including these two dummy variables
8Digitization is measured as the mean number of worldwide
Internet users (in millions) during the data collection period (data
from Internet Live Stats [2016]).
When Does Market Share Matter? / 17
in the main model9 shows that the market share effect is sig-
nificantly weaker in industries with a high digital impact (bO =
–.065, p < .10), whereas the coefficient for the low-influence
dummy is nonsignificant (see Theme 13 in the Web Appendix).
Robustness checks. We conducted various robustness
checks. Specifically, we took a closer look at studies with many
elasticities, marginal effects, outliers, multicollinearity, non-
independent samples, marketing strategy variables, industry
peculiarities (number of industries in sample, high frequency of
banking studies), and potential lagged market share effects.
Themes 12 and 13 in the Web Appendix explain these ro-
bustness checks and how they support the validity of our results.
Discussion and Implications
The relationship between market share and financial firm
performance has stirred the interest of researchers in strategy,
marketing, and economics for almost half a century. This meta-
analysis provides new empirical generalizations concerning (1)
the magnitude of the market share–financial performance
elasticity, and (2) when and how market share has a stronger/
weaker effect on financial performance. We have discussed
several theoretical mechanisms (EF, PQ, MP, CO) that explain
how market share positively or negatively influences financial
performance. Drawing on a detailed moderator and subsample
analysis as well as additional analyses, we determine that the
impact of market share on performance is highly context de-
pendent and, thus, much more complex than suggested by
simple management tools such as the Boston Consulting Group
matrix (Hedley 1977).
Summary and Discussion of Main Findings
Magnitude of the effect. The “raw” mean market share–
financial performance elasticity of .132 suggests a significantly
positive effect of market share on financial performance. Is this
effect substantial? The best way to answer this question is by
referring to other mean elasticities. Edeling and Fischer (2016)
determine a mean elasticity of .04 for the impact of advertising
and .54 for the impact of marketing assets (i.e., customer-
related assets, brand-related assets) on firm value.10 Accord-
ingly, our result is substantial, but less substantial compared
with other marketing metrics such as customer satisfaction
or brand equity. Considering the still-ongoing “debate sur-
rounding the ... magnitude ... of the relationship between
market share and firm profitability” (Rego, Morgan, and
Fornell 2013, p. 2), our results show that market share still
matters for performance and that marketers should actively
continue to monitor market share.
9Because the inclusion leads to a high variance inflation factor
(VIF) for the variable product type services (16.443), we exclude the
two service dummies from this additional model.
10Please note that the performance measures of our study and their
study are not completely comparable because they focus just on firm
value, while we also account for accounting-based performance
measures. In addition, despite a strong increase in studies at the
marketing–finance interface in recent years, the empirical evidence
in this research field is still small compared with the market
share–performance literature.
18 / Journal of Marketing, May 2018
When does market share matter? The significant influ-
ence of contextual characteristics. Drawing on the results of
the overall HLM, the subsample analysis and additional ana-
lyses, we summarize and discuss in the following subsections
the main conclusions for the managerially relevant contextual
characteristics (see Figure 1). Beyond the overall HLM results,
the results of the subsample analysis and the additional analyses
provide a diverse and multifaceted picture with respect to the
impact of contextual factors on the market share–performance
relationship.
Product type. We can conclude that market share has a
stronger effect on financial performance for manufactured goods
than for services. The results support the argument that market
leaders in the manufacturing industry benefit more from higher
efficiency (EF). Market share size advantages may be more
prevalent as a consequence of the production process of physical
goods, which is much easier to standardize than the delivery
process of services (e.g., airlines, retailing). The result also reflects
that the role of market power (MP) that is assigned to market
share is more important for manufactured goods. For instance, we
argued that purchase costs are much more relevant for
manufacturing firms than for service industries (i.e., large market
shares better enable manufacturing firms to use their market
power to extract concessions from suppliers). Interestingly,
with regard to product quality signals (PQ) we argued the-
oretically that the market share effect is more relevant for
service firms. However, this mechanism seems to be less
relevant than the efficiency and market power mechanisms,
particularly given that a wide range of other information
sources exists today that can provide quality information for
services (e.g., online customer reviews for hotels).
Business type. The HLM results show that the effect of
market share on financial performance is stronger for B2C than
for B2B industries. This finding reflects the positive quality
assessment effects (PQ; i.e., consumers view the information
content of a high market share more favorably than organi-
zational customers). The more rational organizational buying
process characterized by buying centers and bidding processes
may explain this finding (Webster and Wind 1972). A different
explanation is a branding effect. The positive effects of a strong
brand, such as lower price sensitivity and simpler brand ex-
tensions, which often go hand in hand with high market shares,
should be more prevalent for consumer than for industrial
products (Homburg, Klarmann, and Schmitt 2010).
Growth rate. The expected positive effect of the mean
market growth rate on the market share–financial performance
elasticity because of the competitor orientation theory (CO) did
not show up in our results. Although extant theoretical and
empirical research has mentioned market growth as a poten-
tial relevant moderator (e.g., Szymanski, Bharadwaj, and
Varadarajan 1993), the empirical knowledge accumulated up
to the present day cannot confirm this.11 Probably, once other
growth-related effects such as recession, time, and region are
controlled for, the market growth does not exert an additional
effect on elasticities. Accordingly, the discussion of when and
11Note that the omission of a market growth variable also does not
have a significant impact (Table 2).
how market share matters for performance should be con-
ducted independently of market growth, which contradicts
the notion of a close relationship between the two dimensions
of the Boston Consulting Group matrix.
Concentration. We find an inverted U-shaped relationship
between mean market share and market share–performance
elasticities. The subsample analysis further shows that this
relationship is present for manufacturing and service industries
as well as B2B and for B2C and mixed business types. This
finding implies that in industries with a medium number of
competitors, aiming for market share is more profitable. In other
words, for markets with many niche players (i.e., low mean
market share) or a few large players (i.e., high mean market
share), the market share effect is less pronounced. This result is
reasonable because for niche players, aiming for market share
would mean that they leave their beneficial market niche po-
sition that signals exclusivity. Large-share firms in markets with
only a few players may price more aggressively to discourage
challengers, and they may be characterized by inertia (Uslay,
Altintig, and Winsor 2010); both effects lower the market
share–performance elasticity.
Geography. The differences in the market share–financial
performance relationship between regions are noteworthy and
reflect the assumed differences with regard to market maturity
and cultural values. The market share effect on financial per-
formance is stronger in Western Europe and emerging markets
than in the United States. In addition, the effect of market share
on performance is stronger in emerging markets particularly for
service industries. Both emerging markets and services imply a
relatively higher level of uncertainty and imperfect information
with regard to market developments and product quality signals
(e.g., Sheth 2011), such that the role of market share as a signal
of certainty and quality (PQ) becomes more relevant. In ad-
dition, given that many consumer goods markets originated in
the United States, the general level of industry maturity can be
expected to be markedly higher in this region than in Western
Europe and especially emerging markets. The results support
the notion that in such mature and highly competitive markets,
market share increases are only achievable at the expense of
profit losses (CO). Conversely, firms benefit more from market
shares in environments that are characterized by less competitor
orientation.
Prior marketing literature has a rich history of conceptual
and empirical research on international marketing (e.g., Sheth
2011; Stremersch and Lemmens 2009). Our results contribute to
this literature by showing how the role of market share for firm
performance differs in the context of diverse geographical
markets. We have focused our arguments on differences in
market maturity and national culture. Other significant differ-
ences (e.g., market heterogeneity, level of unbranded compe-
tition, regulatory structures) may also play an important role
(Sheth 2011). For instance, whereas the United States is
characterized by a very low level of regulation, Western Eu-
ropean countries are known to be very regulated (Stremersch
and Lemmens 2009). Lower levels of regulation result in higher
competitive intensities, which in turn increase managers’
competitor orientation (CO). The differences in regulatory
structures as such may be another reason why the market
share–performance elasticity is lower in the United States than
in Western Europe.
Recession period. The influence of recessions on market
share–financial performance elasticities hinges completely on
the context. In non-Western economies (i.e., emerging markets,
other industrialized countries), large-share firms benefit from the
efficiency (EF) and market power (MP) mechanisms that
provide a certain buffer during economic downturns, implying
that such businesses survive these economically hard times more
profitably than their smaller counterparts. The effect reverses,
however, for samples that include both B2C and B2B firms and
firms in the United States. Possible explanations are (1) the
tendency of consumers and industrial customers to substitute
generally more expensive leader brands with less expensive
follower and private label products (Lamey et al. 2007), and (2)
different marketing strategies of national brand manufacturers
(rather procyclical) versus retailers (rather countercyclical)
during recessions (Lamey et al. 2012). In addition, in these
settings, market leaders could have more to lose than small-share
firms, such that they might be more inclined to act procyclically
and myopically during recessions to keep market shares at their
high levels. Alternatively, large-share firms might be less
flexible than smaller niche players in applying recovery strat-
egies successfully, which is necessary to counter the threats
provided by recessions (Pearce and Robbins 1994).
Time trend. Regarding the effect of time, the overall HLM
result does not support the expected negative relationship.
However, in the subsample analysis, we find that for manu-
factured goods, elasticities are significantly lower after 1993
compared with the period before 1993 (i.e., for this product
type, elasticity has decreased). Our alternative measurement of
the influence of digitization on the market share performance
elasticity supports this result. In addition, in Western Europe
and in emerging markets, the effect of market shares on per-
formance has also declined over time. That weaker effect on
financial performance in recent years may be explained by
the environmental market changes with the introduction of the
Internet as an information, marketing, and sales channel as the
most apparent development. This influence of the Internet
seems to mitigate some of the positive mechanisms of higher
market shares with regard to efficiency gains (EF), market
power (MP), and product quality signals (PQ). Table 3 sum-
marizes the discussion and illustrates the context-specific nature
of the impact of market share on financial performance.
Managerial Implications
Senior marketing executives still perceive market share as a
very useful performance indicator (Farris et al. 2010). In
principle, the determined overall positive and significant
mean market share–financial performance elasticity supports
the idea that marketing managers should keep an eye on market
share. However, the elasticity is lower than other comparable
elasticities. Specifically, the results from the meta-analysis
by Edeling and Fischer (2016) show that the mean firm-
value elasticities of customer-related assets (e.g., customer
satisfaction) and brand-related assets (e.g., brand equity) are .72
and .33, respectively. The rule by Dorfman and Steiner (1954)
suggests that marketing budgets should be allocated according
When Does Market Share Matter? / 19
 TABLE 3
Implications
A: Implications Based on the Type of Product
Manufacturing Services

Market share has a stronger • B2C and mixed customer • Industries with medium
effect on firm financial relationships number of competitors
performance for … • Industries with medium • Emerging markets
number of competitors
Examples from meta-analytic Pharmaceuticals, capital Airlines, retail
database goods

B: Implications Based on the Type of Customer Relationship

Both B2B and B2C Only B2C Only B2B

Market share has a stronger • Manufactured goods • Manufactured goods N.A.

effect on firm financial • Industries with medium • Industries with medium
performance for … number of competitors number of competitors
• Western Europe,
emerging markets
• Nonrecession periods
Examples from meta-analytic Banking, samples with mixed Food products, Electrical
database industries supermarkets engineering,
mining

C: Implications Based on the Geographic Region

Other
Industrialized Emerging
United States Western Europe Countries Markets

Market share has a stronger • Manufactured goods • Less recent time periods • Markets with low • Less recent
effect on firm financial • Mixed customer growth time periods
performance for … relationships • Recession • Recession
• Industries with medium periods periods
number of competitors
• Nonrecession periods

Examples from meta-analytic France, United Kingdom Japan, South China, Ghana
database Korea
Notes: We derive this table from the results of the subsample analysis (Table 2). N.A. = not applicable (i.e., no significant HLM results in the B2B
subsample).

to the elasticities of marketing instruments. Transferring this
rule to our result, together with the results by Edeling and
Fischer (2016), would imply the following allocation of mar-
keting budgets on the three central objectives of marketing
actions: Spend 61% (.72/[.72 + .33 + .13]) of the budget on
building customer-related assets, 28% (.33/1.18) on building
brand-related assets, and 11% (.13/1.18) on increasing market
share. Naturally, synergies between investments in these three
intermediate marketing performance metrics exist (e.g., adver-
tising investments simultaneously build market share and brand
attitude metrics [Hanssens et al. 2014]). Nevertheless, if forced
to make a trade-off, as could be the case for investments in short-
term market share increases and long-term customer satisfaction
(Rego, Morgan, and Fornell 2013), our results suggest a stronger
focus on market-based assets than on market share.
Our result has further implications for management in-
centives and performance measurement systems. Admittedly,
pursuing high market share involves a very strong motivational
aspect (e.g., “we want to be number one” or “we want to beat
competitor xy”). If companies do not want to forgo such
employee-directed incentives, they should opt for additional
metrics (e.g., customer satisfaction, brand equity). Monitoring
the own firm’s performance relative to competitors with respect
to such market-based assets is easy nowadays given the mul-
titude of providers such as the American Customer Satisfaction
Index or Young & Rubicam (consumer-based brand equity).
The meta-analytic results imply different tendencies to
focus on market share as a strategic performance variable in
different market situations. All else being equal, market share
should be allowed to have a higher stake in corporate strategies

20 / Journal of Marketing, May 2018

for manufacturing compared with service firms, for B2C
compared with B2B companies, and in emerging markets and
Western European markets compared with the U.S. market.
Furthermore, managers of capital-market-oriented firms should
be aware that investors do not regard market share as a key stock
investment criterion. Table 3 provides more nuanced impli-
cations for managers in different contextual settings:
• Managers of tangible goods should put more weight on
market share objectives if they are active in fast-moving
consumer goods industries or if they target both private and
organizational customers.
• Managers in service firms should particularly rely on market
share in emerging markets where customers perceive market
share as a highly important purchase criterion.
• Managers in firms active in both B2B and B2C marketing ought
to emphasize market share in the manufacturing sector, in Western
Europe and emerging markets, and during upswing periods.
• For managers with regional responsibilities, the role of market
share depends on the geographic (i.e., cultural) context. In the
United States, market share is more relevant for tangible goods,
for mixed business types (B2B and B2C), and during economic
expansions. In contrast, in non-Western economies, managers
should focus more on market share gains during recessions.
Overall, managers should consider not only their product
and business type or regional context. Our results suggest that
competitive intensity is a relevant driver of market share ef-
fectiveness. The highest performance potential of market share
exists for industries with a moderate number of competitors.
Thus, firms in moderately concentrated markets should actively
pursue market share gains, whereas the effect in industries with
many small or just a few large contestants is weaker.
Research Implications
Twenty-five years after SBV’s meta-analysis, we present new
results pertaining to the relationship between market share and
financial performance. Compared with SBV’s study, we can
derive a variety of new insights due to more data and many new
moderators. We show how the market share–financial perfor-
mance elasticity differs between product types, between regions,
and over time. We further find significant impacts of new
methodological characteristics that researchers should integrate in
the future when building new market share–performance models.
Specifically, we derive the following research implications.
First, 86% of all elasticities in our meta-analysis stem from
linear models. However, linear models assume that financial
performance can be increased infinitely by increasing market
share. This assumption is unrealistic, given that market share
increases are associated with costs. A concave functional form
of the profitability curve with a maximum that is associated with
the optimal level of market share seems to be more plausible. In
this maximum, the market share elasticity would be zero, and
firms are near an equilibrium state where striving for more
market share is presumably not profitable anymore (for an
elaborate discussion on marketing–profit elasticities in the
optimum, see Edeling and Fischer [2016]). However, it is
possible that within one industry, some firms are at this opti-
mum of the market share–profit function while some firms
benefit and others suffer from market share increases. The mean
market share–performance elasticity depends on the distribution
of the firms’ location on this function. The findings of the few
empirical studies that focus on the functional form between
market share and financial performance (Schwalbach 1991;
Uslay, Altintig, and Winsor 2010) have shown that firms with
excessive market shares tend to underperform compared with
their slightly smaller counterparts. We have also included the
squared mean market share. We find an inverted U-shaped
relationship with respect to the market share–performance
elasticity. Taken together, future market share–performance
models need to test for potential nonlinear effects between
market share and financial performance.
Second, only 10% of all elasticities in our sample use a fi-
nancial market–based performance measure. We find that the
results of the accounting-based and financial market–based
measures differ significantly. Given the increased importance of
financial market–based performance metrics due to the stronger
shareholder-value orientation (Katsikeas et al. 2016), it is evident
that researchers should focus more on the relationship between
market share and stock returns, Tobin’s q, and so on.
Third, 91% of all elasticities in this meta-analysis stem from
models that do not control for endogeneity issues (i.e., they do not
consider a potential feedback effect from financial performance
through advertising expenditures and other marketing activities to
market share; for a recent investigation of such feedback effects,
see Fischer and Himme [2017]). When correcting the elasticity
measures in our sample for this method-induced bias (for a
similar procedure, see Tellis [1988]), the mean market share
elasticity is lower at .065, but still significantly positive ( p < .01).
It is typical for meta-analytic marketing research that the majority
of studies in the database do not account for endogeneity (e.g.,
Bijmolt, Van Heerde, and Pieters 2005). Nevertheless, to obtain
less biased results in future market share–financial performance
studies, researchers should account for endogeneity of market
share. Moreover, 97% of the studies in the sample examine
market share and performance from the same period. Given that
the discussed theoretical mechanisms may take some time to fully
unfold, it could be worthwhile to have more studies that explicitly
account for potential dynamics.
Finally, researchers should reconsider the usage of market
share as the only performance metric. According to Katsikeas
et al. (2016), more than one fourth of all published studies that
relate marketing actions to firm performance uses market share as
an outcome measure. Our findings indicate that the role of market
share for performance is very context-specific. We have further
presented theoretical mechanisms (EF, MP, PQ, CO) of how
market share can contribute both positively and negatively to
financial performance. The recent finding by Rego, Morgan, and
Fornell (2013) of a negative relationship between market share
and customer satisfaction should also be taken into account in this
context. Thus, similar to managers, researchers should evaluate
whether they additionally incorporate other operational perfor-
mance measures such as consumer mindset (e.g., brand equity) or
customer performance (e.g., lifetime value) metrics when
examining the performance effects of marketing activities.
Alternatively, researchers should focus more directly in-
vestigating the mechanisms—for instance, testing the market
power theory (MP) by examining the impact of market share on
selling prices or supplier discounts (see, e.g., Ailawadi, Farris,
and Parry 1999).
When Does Market Share Matter? / 21
Limitations and Directions for Future Research
This study has some limitations, which offer interesting future
research opportunities. First, we were not able to include the
entire universe of market share–performance studies in the
meta-analysis, because some authors do not provide the nec-
essary information to calculate elasticities.
Second, the meta-analytic results rely on partially subjective
data coding. We make all the coding decisions transparent
through the provision of the meta-analytic database.
Third, in our meta-analysis we depend on how the studies in our
database measure market share. The majority of studies measure
market share at the firm level, although in practice firms that consist
of a variety of businesses typically measure market shares at the
business-unit level. Future research should more carefully examine
whether the aggregate measurement of market shares is not in
conflict with the real practice of multibusiness firms.
Finally, we find the first indications that the Internet has
changed the market share–financial performance relationship.
However, none of the primary studies in the meta-analysis
explicitly addresses this issue. The literature is inconclusive
with respect to the question of whether the Internet supports the
supply and demand for small-share niche products (“long tail”
theory) or for large-share blockbuster products (“superstar”
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