1. The Cornerstones of Competitive Advantage: A Resource-Based View
Margaret A. Peteraf
Presenter: Wen ZHENG

2. 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

3. Cornerstones Heterogeneity Ex Post Limits to Competition
Imperfect Mobility
Ex Ante Limits to Competition

4. Cornerstones Heterogeneity Ex Post Limits to Competition
Imperfect Mobility
Ex Ante Limits to Competition

5. 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

6. Cornerstones Heterogeneity Ex Post Limits to Competition
Imperfect Mobility
Ex Ante Limits to Competition

7. 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)

8. 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-tradeable assets (Dierickx and Cool, 1989)
Time compression diseconomies, asset mass efficiencies, interconnectedness of asset stocks, asset erosion, and causal ambiguity

9. Cornerstones Heterogeneity Ex Post Limits to Competition
Imperfect Mobility
Ex Ante Limits to Competition

10. Imperfect Mobility Perfectly immobile Imperfectly mobile
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)

11. Cornerstones Heterogeneity Ex Post Limits to Competition
Imperfect Mobility
Ex Ante Limits to Competition

12. 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)

13. Cornerstones

14. Applications Why do some firms outperform others?
Help managers understand, preserve, or extend their competitive advantage
Single Business Strategy
Corporate Strategy

15. Single Business Strategy
Help managers have a clear understanding of whether their situation 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

16. 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