abstract: We investigate the effect of product excellence on firm profitability in a competitive market with both horizontal and vertical differentiation. We first develop a theoretical model and derive the determinants of the relation between excellence and profitability. We then use data from the Italian wine market to test empirically our theoretical predictions. Results show that excellence - as proxied by firm and collective reputation - has no significant impact on profitability - as measured by the Return on Invested Capital (ROIC).

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