As a theory of profit, resource-based theory is focused on a single causal mechanism?competitive advantage. Although this focus has been useful in helping to understand some sources of interfirm profit differentials, it is nevertheless highly limiting because competitive advantage is not the only causal mechanism by which profit can be generated. Three other mechanisms, labeled here as rivalry …
Today economic activity is increasingly organized by fusing elements of hierarchies into market transactions (e.g., quasi-integration) or bringing aspects of markets within hierarchies (e.g., empowerment). These hybrid governance forms are not adequately addressed in most extant theories that envision a unidimensional continuum between markets and hierarchies, thereby ignoring true hybrids that…
Makadok (2001) has recently developed a mathematical model aimed at synthesizing the resource-based and dynamic-capabilities views of the rents creation process. One unstated implicit assumption in that model is that each bidding firm in the resource market is ignorant not only of the content of rival firms' private information, but also of the quality of that information. Consequently, that mo…
This paper models the joint impact of two determinants of profitable resource advantages: the accuracy of managers' expectations about the future value of a resource, and the severity of agency problems that cause managers' interests to diverge from those of shareholders. While the impact of each of these factors on resource-investment decisions has been considered in isolation, their joint int…