where r;k is the rate of return of corporation k's activity in industry i, Sik is the corresponding market share, ai and 13k are industry and corporate effects respectively, and Eik is a disturbance. Schmalensee used regression to conclude that corporate effects were non-existent
(13k = 0), and variance components estimation to show that industry effects were significant and substantial (a > 0), and that share effects were significant but not substantial