| Arriving at a strategic theory of the firm |
| | Phelan, Steven E. | U. of Texas, Dallas | sphelan@utdallas.edu | 972-883-2754 |
| | Lewin, Peter | U. of Texas, Dallas | plewin@utdallas.edu | 972-883-2729 |
| | Several authors have characterized their work as “moving towards” a strategic theory of the firm (Rumelt, 1984). The authors of this paper argue that it is time to start “arriving” at a strategic theory of the firm because a theory of the firm necessarily underlies every decision to enter a new line of business or outsource a function. Existing strategic theories of the firm are contrasted with economic theories of the firm and are found to be weak in explaining the existence of the firm while strong in their understanding of value creation and the location of firm boundaries. It is concluded that firms exist for a variety of reasons but corporations have grown to dominate the business landscape because of their superior ability to create, and protect, value for their owners. |
| | Keywords: theory of the firm; resource-based; transaction costs |
| How Does Industry Context Influence Firm Performance? Resources vs. Rivalry |
| | McEvily, Susan K. | U. of Pittsburgh | smcevily@katz.business.pitt.edu | (412)-648-1707 |
| | Roy, Raja | U. of Pittsburgh | rajaroy@mail.business.pitt.edu | (412)-648-1670 |
| | Industry membership accounts for about one fifth of the variation in firm profits. Extant theory suggests that these effects correspond to differences in industry structure that affect rivalry; yet, empirical support for this view is limited. In this paper, we present the preliminary results of a study that examines how industry resources affect the level, dispersion, and persistence of firm profits. |
| | Keywords: resource-based theory,; industry structure,; firm performance |
| Beyond Equilibrium: Towards a Process Theory of Competitive Advantage |
| | Mahnke, Volker | Copenhagen Business School | volker@cbs.dk | 0045-3815-2566 |
| | Foss, Nicolai | Copenhagen Business School | njf.ivs@mail.cbs.dk | 0045-3815-2566 |
| | We argue that strategy fundamentally concerns disequilibrium phenomena, such as discovery, innovation, resource-combination, imagination - in short, entrepreneurship. Therefore, the understanding of strategizing is likely to be led astray by drawing too heavily on equilibrium theories. Arguably, the three dominant economic approaches to strategy - the Porter industry analysis approach, the new industrial organization, and the resource-based approach - are characterized precisely by their strong reliance on equilibrium methodology. We suggest that a dynamic market process approach combined with cognitive strategy process research may constitute a platform for aligning strategy process and content research with market process theory. Together, these may help rethinking competitive advantage based on an integrated theory of strategy. |
| | Keywords: competitive advantage; disequilibrium |
| Are Baseball Free Agents a Source of Competitive Advantage? |
| | Poppo, Laura | Virginia Polytechnic Institute and State U. | lpoppo@vt.edu | (540) 231-4553 |
| | Weigelt, Keith | U. of Pennsylvania | weigelt@management.wharton.upenn.edu | (215)-898-6369 |
| | This paper examines a relatively untested premise of the resource-based view of the firm: managers can exploit imperfect factor markets to create a competitive advantage. For example, Barney (1986) discusses how uncertainty about a factor’s true value may cause short-term inefficiencies. We test several theoretical implications in the factor market for free agent baseball players from 1985 to1992. We find that: 1) owners generate a return from free agent acquisition, which suggests the factor market is imperfect; 2) owners generate a slightly lower return from higher-paid free agents, suggesting these free agents use monopoly power to increase salary levels; and, 3) owners can not predict with certainty the future performance, and hence value, of free agents. These results suggest two strategies owners may use to generate returns: consistent with the resource base view, the strategic use of asymmetric information, and from the market view, the exercise of monoposony power. We also examine strategies owners may use to exploit market inefficiencies due to incomplete information, and comment on the difficulties of examining empirically resource-based view propositions. |
| | Keywords: resource-based view,; competitive advantage,; baseball |
| The Role of Non-Core Resources in Competitive Advantage |
| | Eckhardt, Jonathan T. | U. of Maryland | jonathan@wam.umd.edu | (301) 405-2169 |
| | Smith, Ken G. | U. of Maryland | Kgsmith@rhsmith.umd.edu | 301-405-2250 |
| | A primary focus of strategy research has been the identification of key core resources that lead to sustained
competitive advantage. However, the relationship between non-core resources and competitive advantage
has been largely ignored. In this paper we demonstrate the importance of non-core resources in determining
firm performance, and we discuss how strategies with a strict focus on the development of core resources
may be problematic. |
| | Keywords: non-core; resources; competencies |