A bargaining perspective on resource advantage

Lippman, Steven A.; Rumelt, Richard P.

doi:10.1002/smj.345

Cited by 447 publications

(384 citation statements)

References 27 publications

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“…It is commonly argued that the core embodies an extreme form of rivalry (Aumann, 1985), which can be seen as unrealistic (Lippman and Rumelt, 2003). Indeed, competing firms can capture even less value than in Bertrand price competition, which is a standard 4 Coalitional game theory -also called cooperative game theory -focuses on the coalitions players form to create value, and how the competitive interplay of the coalitions affects value capture.…”

Section: The Value-based Approachmentioning

confidence: 99%

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Value Creation and Value Capture with Frictions

Chatain

Zemsky

2011

SSRN Journal

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We use a formal value-based model to study how frictions-incomplete linkages in the industry value chain that keep some parties from meeting and transacting-affect value creation and value capture. Frictions arise from search and switching costs and moderate the intensity of industry rivalry and the efficiency of the market. We find that firms with a competitive advantage prefer industries with less, but not zero, frictions. We show that rivalry interacts nontrivially with other competitive forces to affect industry attractiveness. Firm heterogeneity emerges naturally when we introduce resource development. Heterogeneity falls with frictions, but the sustainability of competitive advantage increases. Overall, we show that introducing frictions makes value-based models very effective at integrating analyses at the industry, firm, and resource levels. AbstractWe use a formal value-based model to study how frictions in the product market affect value creation and value capture. We define frictions as incomplete linkages in the industry value chain that keep some parties from meeting and transacting. Frictions, which arise from search and switching costs, vary across markets and over time as, for example, products commoditize and competition becomes more global. Importantly, frictions moderate the intensity of industry rivalry, as well as the efficiency of the market. We find that firms with a competitive advantage prefer industries with lower levels of frictions than their disadvantaged rivals. We show that the impact of rivalry on industry attractiveness cannot be analyzed independently of other competitive forces such as barriers to entry and buyer bargaining power. We introduce resource development in our model to study the emergence and sustainability of competitive advantage. Firm heterogeneity emerges naturally in our model. We show that the extent of firm heterogeneity falls with the level of frictions, but sustainability increases. Overall, we show that introducing frictions makes value-based models of strategy even more effective at integrating analyses at the industry, firm and resource levels.

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Section: The Value-based Approachmentioning

confidence: 99%

“…Second, profits are net of resource development costs. 16 Supplier i's profit function depends on whether it has the higher value creation. In particular, for i = j we have that…”

Section: Endogenous Heterogeneity In Value Creationmentioning

confidence: 99%

Value Creation and Value Capture with Frictions

Chatain

Zemsky

2011

SSRN Journal

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“…More broadly, Arend also argues that resources that meet the VRIO criteria are usually identified only ex post, making the explanation circular (empirical tests handle this problem, however); (2) the RBV is mainly used as a convenient framing device and specific implications of the view are seldom tested; (3) the link between resources and performance is not carefully examined, for example, in terms of organizational variables that mediate this link; (4) key resources are hard to measure, particularly those "socially complex" and "tacit" resources that the view often focuses on (e.g., Dierickx & Cool, 1989;Barney, 1991); and (5) the gains from superior resources may not be captured at the firm level-but rather be captured by individual resources (Coff, 1997(Coff, , 1999Lippman & Rumelt, 2003a)-in which case firm performance cannot be the dependent variable.…”

Section: Empirical Workmentioning

confidence: 99%

Modern Resource-Based Theory(ies)

Foss

Stieglitz

2010

SSRN Journal

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“…What is clear, however, is that the tool kit of non-zero-sum game theory has ready application here (Brandenburger and Harborne W. Stuart 1996;Lippman and Rumelt 2003).…”

Section: Notes On the Interesting Casesmentioning

confidence: 99%

The logic of appropriability: From Schumpeter to Arrow to Teece

Winter

2006

Research Policy

133

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A bargaining perspective on resource advantage

Cited by 447 publications

References 27 publications

Value Creation and Value Capture with Frictions

Value Creation and Value Capture with Frictions

Modern Resource-Based Theory(ies)

The logic of appropriability: From Schumpeter to Arrow to Teece

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