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The Cornerstones of Competitive A dvantage: A Resource-Based View. Margaret A. Peteraf. Presenter: Wen ZHENG. Research Question.

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the cornerstones of competitive a dvantage a resource based view

The Cornerstones of Competitive Advantage: A Resource-Based View

Margaret A. Peteraf

Presenter: Wen ZHENG

research question
Research Question
  • Develop a general model of resources and firm performance, which at once integrates the various strands of research and provides a common ground from which further work can proceed.
    • Four cornerstones of competitive advantage
    • Applications of the resource-based model
cornerstones
Cornerstones
  • Heterogeneity
  • Ex Post Limits to Competition
  • Imperfect Mobility
  • Ex Ante Limits to Competition
cornerstones1
Cornerstones
  • Heterogeneity
  • Ex Post Limits to Competition
  • Imperfect Mobility
  • Ex Ante Limits to Competition
heterogeneity
Heterogeneity
  • Resource and capabilities are heterogeneous across firms. (Barney, 1991)
  • Superior Resources (Limited supply)
    • Ricardian rents Scarcity of resource supply
    • Monopoly rents Restriction of output
cornerstones2
Cornerstones
  • Heterogeneity
  • Ex Post Limits to Competition
  • Imperfect Mobility
  • Ex Ante Limits to Competition
ex post limits to competition
Ex post limits to competition
  • Condition of heterogeneity can be preserved
  • Competition
    • Ricardian Rents: supply of scarce resource (supply curve elasticity)
    • Monopoly Rents: output (individual demand curve elasticity)
ex post limits to competition1
Ex post limits to competition
  • Imperfect substitutability:
    • Demand elasticity (Porter, 1980)
  • Imperfect imitability
    • Entry barrier (Bain, 1956)
      • Isolate industry participants from potential entrants
    • Mobility barrier (Caves and Porter, 1977)
      • Isolate groups of similar firms in a heterogeneous industry
    • Isolating mechanisms(Rumelt, 1984, 1987)
      • Property rights, information asymmetries, frictions, causal ambiguity, producer learning, buyer switching cost, reputation, buyer search costs, channel crowding, economies of scale
    • Failure of competitive market (Yao, 1988)
      • Production economies; sunk cost; transaction cost; imperfect information
    • Firm orientation (Ghemawat, 1986)
      • Size advantage, preferred access to either resources or customers, restrictions on competitors’ options
    • Valuable but non-tradeableassets (Dierickxand Cool, 1989)
      • Time compression diseconomies, asset mass efficiencies, interconnectedness of asset stocks, asset erosion, and causal ambiguity
cornerstones3
Cornerstones
  • Heterogeneity
  • Ex Post Limits to Competition
  • Imperfect Mobility
  • Ex Ante Limits to Competition
imperfect mobility
Imperfect Mobility
  • Perfectly immobile
    • Property rights are not well defined (Dierickx and Cool, 1989; Meade, 1952; Bator, 1958)
    • Idiosyncratic and no other use out side the firm (Williamson, 1979)
  • Imperfectly mobile
    • Resources are specialized to firm-specific needs (Montgomery and Wernerfelt, 1988)
    • Co-specialized assets (Teece, 1986)
    • Transaction cost is high (Williamson, 1975; Rumelt, 1987)
  • Necessary conditions for Sustainable competitive advantage
    • Resource will remain available to the firm
    • Rents will be shared by the firm
    • The opportunity cost does not offset the rent (next best potential users)
cornerstones4
Cornerstones
  • Heterogeneity
  • Ex Post Limits to Competition
  • Imperfect Mobility
  • Ex Ante Limits to Competition
ex ante limits to competition
Ex ante limits to competition
  • Prior to any firm’s establishing a superior resource position, there must be limited competition for that position.
  • Economic performance depends on both the returns of the strategies and cost of implementing the strategy (Barney, 1986)
applications
Applications
  • Why do some firms outperform others?
  • Help managers understand, preserve, or extend their competitive advantage
    • Single Business Strategy
    • Corporate Strategy
single business strategy
Single Business Strategy
  • Help managers have a clear understanding of whether theirsituation meets necessary conditions for a sustainable advantage
    • Differentiate valuable from less valuable resource
      • Mobility
      • Imitable
    • License vs. Internally develop
      • Imperfect mobile  internally develop
      • Co-specialized assets internally develop
corporate strategy
Corporate Strategy
  • Scope of the firm
    • Barney (1988): strategically related acquisition
      • How rare and inimitable is the resulting combination of resources
    • Montgomery and Hariharan (1991): diversification
      • Broad resource bases
    • Theory of diversification
      • Quasi-fixed fungible
      • Excess capacity in resources+ high transaction cost
      • Paradox “excess capacity” “scarcity rents”
    • Montgomery and Wernerfelt (1989): extent of diversification
      • Specificity + market opportunities extent of diversification
    • Dosi, Teece and Winter (1990): “coherence” of business activity
      • Core competence  degree of “coherence”
      • Speed of learning, breadth of the path dependencies, degree of asset specialization and nature of selection environment  scope of firm