To the extent that an organization’s culture reduces a firm’s costs or increases the willingness of its customers to pay and is rare among competitors, an organization’s culture can be a source of sustained competitive advantage. This is because an organization’s culture is a socially complex resource and thus often costly to imitate.
Implications for Practicing Managers
Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?
Strategic Factor Markets: Expectations, Luck, and Business Strategy
Even if a firm has an apparent competitive advantage in a product market, if the markets within which the resources needed to create this advantage anticipate the value that can be created by this product market position, then this favorable position will not be a source of economic value for a firm. Instead, firms need to find ways to create value with their resources and capabilities that are not anticipated when access to those resources is acquired.
Returns to Bidding Firms in Mergers and Acquisitions: Reconsidering the Relatedness Hypothesis
The amount of value a firm can appropriate from an acquisition depends on the difference between how much value it can create with a target firm and how much value the next highest bidder can create with a target firm. So, relatedness or “synergy” between a bidder and target is necessary for a firm to appropriate value from an acquisition, but does not insure that a bidder will be able to appropriate this value.
Firm Resources and Sustained Competitive Advantage
To be a source of sustained competitive advantage, resources controlled by a firm must be valuable—in that they can be used to reduce a firm’s costs and/or used to increase the willingness of customers to pay—rare among competing firms, costly for other firms to imitate, and not have any functionally equivalent substitutes. Resources are most likely to be costly to imitate and non-substitutable when they are socially complex (e.g., organizational culture), developed over long periods of time (i.e., are path dependent), and when actions needed to develop these resources are not obvious (i.e., they are causally ambiguous).
Organizational Responses to Legal Liability: Employee Exposure to Hazardous Materials, Vertical Integration, and Small Firm Production
Sometimes firms adopt non-vertically integrated production strategies to avoid the legal liability associated with a production process. This is analyzed for the case of production processes that lead to on-the-job exposure to hazardous materials.
Trustworthiness as a Source of Sustained Competitive Advantage
Looking Inside for Competitive Advantage
Managers can look outside their firm—at the attractiveness of an industry—or inside their firm—at their own valuable, rare, and costly to imitate resources—to build a sustained competitive advantage. Between these two, the latter is more likely to be successful.
Information Technology and Sustained Competitive Advantage: A Resource Based Analysis
The traditional view of how information technology (IT) can be a source of competitive advantage focuses on simplifying business processes and providing managers with more timely information. These aspects of IT are, in fact, only sources of competitive parity. IT is most likely to be a source of advantage when it is deeply integrated into other aspects of a firm’s operations and culture, and in that way that is rare and costly to imitate.
Differences Between Entrepreneurs and Managers in Large Organizations: Biases and Heuristics in Strategic Decision Making
While everyone uses biases and heuristics to make decisions, entrepreneurs are much more likely to use two of these then managers in large organizations: the willingness to generalize from small samples (i.e., their personal experience) and their confidence in generalizing from these small samples. This enables entrepreneurs to make decisions that managers not operating with these biases would not make. This also explains why countless studies have found that entrepreneurs are no more comfortable with taking risks than non-entrepreneurs, even though entrepreneurs often engage in more risky actions than non-entrepreneurs. If a person is willing to confidently generalize from their personal experience, they simply do not see their actions as risky.
On Becoming a Strategic Partner: the Role of Human Resources in Gaining Competitive Advantage
Most CEOs believe that their employees are their most important source of competitive advantage but believe that the HR function is rarely a source of such advantages. This is because the HR function in many firms is very transactional and does not focus on how it can help employees be sources of sustained advantage.
How a Firm’s Capabilities Affect Boundary Decisions
The most influential theories about how firms decide on their boundaries focus on minimizing transactions and related costs. However, firm boundaries can also be affected by a firm’s resources, and how a firm is able to generate and appropriate value from these resources.
How Entrepreneurial Firms Can Benefit From Alliances with Large Partners
Entrepreneurial firms often outsource development and marketing of their products or technologies to large firms. To protect themselves, these entrepreneurial firms often form strategic alliances with these large firms. Unfortunately, because the contracts that underlie these alliances can never be complete, and because they are costly to enforce, entrepreneurial firms often do not fare well in these alliances.
Information Technology and the Performance of the Customer Service Process: A Resource-based Analysis
Having high quality IT is positively related to firm performance; having a service-oriented culture is also positively related to firm performance. However, having an approach to IT development that builds on and reinforces a firm’s service culture is a source of sustained competitive advantage for a firm.
Employee Incentives to Make Firm Specific Investments: Implications for Resource-based Theories of Corporate Diversification.
Most theories of corporate diversification focus on the importance of realizing some sort of operational synergies across a firm’s diversified businesses. However, a firm that is operating in several imperfectly correlated businesses can use cash flows from these businesses as an “insurance policy” that can assure employees that if they make human capital investments that are only valuable in this firm, that they can still be compensated for doing so.
Responsibility and Firm Performance: Investor Preferences and Corporate Strategies
A firm’s decision to invest in corporate social responsibility (CSR) is like product it sells in the financial markets. Depending on the supply and demand for opportunities to invest in socially responsible firms, implementing a CSR strategy can increase, decrease, or have no impact on the market value of a firm. These results do not depend on the impact of CSR on the present value of a firm’s cash flows.
Discovery and Creation: Alternative Theories of Entrepreneurial Action
Sometimes, entrepreneurial opportunities aren’t “out there” just waiting to be discovered by unusually alert individuals. Rather, sometimes entrepreneurs create the opportunities they end up exploiting by engaging in an iterative process of forming these opportunities under uncertainty.
Real Options in Divestment Alternatives
When the value of a business that is being divested is not fully known, firms may choose to divest this business in stages.
Who Captures the Value Created with Human Capital?
While most people agree that employees are an important source of competitive advantage, firms do not always appropriate the value that is created by human capital. Generally, the more valuable an employee’s human capital is for a particular firm (and not other firms), the more likely that a firm will be able to appropriate the value created by that human capital. However, if a firm tries to appropriate all this value, then employees will simply avoid making these highly firm-specific investments in the first place.
Enrolling Stakeholders Under Conditions of Risk and Uncertainty
How stakeholders are enrolled in entrepreneurial ventures depends on if those ventures are exploiting risky or uncertain opportunities. For example, if they are exploiting risky opportunities, then entrepreneurs develop their business model and use the business model to recruit stakeholders. If they are exploiting uncertain opportunities, the business model is likely to still be evolving, and thus cannot be used to recruit stakeholders. Instead, they must rely on their personal relationships to recruit stakeholders.
Corporate Diversification and the Value of Individual Firms: A Bayesian Approach
Most research on the value of corporate diversification shows that it either destroys some of a firm’s economic value or has no impact on a firm’s economic value. Using a different methodology that examines the value of corporate diversification compared to a firm’s alternative strategies suggest that the vast majority—over 95%—of public firms in the US economy pursue diversification strategies that are consistent with the wealth maximizing interests of shareholders.
Firm-Specific Human Capital Investments as a Signal of General Value
The general conclusion is that the value created by general human capital—that is, human capital that is valuable in many firms—is appropriated by employers, but that the value created by firm-specific human capital—that is, human capital that is valuable in only a particular firm—can be appropriated by employees. However, it turns out that there are parts of firm-specific human capital—namely, an employee’s willingness and ability to make firm-specific investments—that are actually general human capital, and thus can be at least partly appropriated by firms.
Why Resource-based Theory’s Model of Profit Appropriation Must Incorporate a Stakeholder Perspective
The “deal” offered to a firm’s stakeholders if only shareholders have a claim on sharing a firm’s profits is—”work hard, make specific investments in us, be loyal, work together, and all the economic value you help create we will give to our shareholders.” Not surprisingly, not many stakeholders will be interested in this “deal.” To induce stakeholders to make value-creating resources available to a firm, a firm must be willing to share at least some of the upside that such resources might create with these stakeholders. This means that in order for a firm to generate economic value, it must recognize that at least some stakeholders, in addition to shareholders, have a claim on a firm’s profits—a conclusion that deeply contradicts the assumption that only shareholders can, or should, have such a claim.