Because competition acts to direct resources towards uses offering the highest returns,
persistently unequal returns mark the presence of either natural or contrived impediments to resource flows. The study of such impediments is a principal concern of industrial organization economics and the dominant unit of analysis in that field has been the industry. The implicit assumption has been that the most important market imperfections arise out of the collective circumstances and behavior of firms. However, the field of business strategy offers a contrary view: it holds that the most important impediments are not the common property of collections of firms, but arise instead from the unique endowments and actions of individual corporations or· business-units. If this is true, then industry may not be the most useful unit of analysis. Consequently, there should be considerable interest in the relative sizes of inter-industry and intra-industry dispersions in long-term profit rates.