The determinants of corporate profitability in the Italian domestic appliances industry

Among the industries that characterize the Italian sectoral specialization, domestic appliances have had, since the 1950s, a prominent role. However, from the beginning of the 2000s, the Italian producers have experienced a contraction in the total output and severe losses in terms of export shares in the global market. Within the industry, some firms have been successful, positively contributing to the aggregate performance, while others have performed poorly and reduced the overall sectoral growth and competitiveness. By employing a sample of about 140 companies observed in the period 2007–2016 and using a dynamic panel approach, we inquire into the determinants of profitability in the domestic appliances industry in Italy. Competitiveness (in terms of both higher labor productivity and lower labor cost per employee) is a key determinant of profitability in this industry. Moreover, firm (absolute) size, the firm’s financial structure and the firm’s market share also play a role in explaining differences in profit rates across firms. Managers and policy makers should take the maturity of the domestic appliances industry into account in order to take proper decisions and design effective interventions, all aimed at sustaining the sectoral competitiveness in the global market.