RESEARCH ISSUES

SHAWNEE VICKERY, Feature Editor, Eli Broad Graduate School of Management, Michigan State University

COMPETITIVE ADVANTAGE RESEARCH: A NEW PERSPECTIVE

by J.L. Stimpert Michigan State University

The aim of strategies, including functional level manufacturing and procurement strategies, is the development of sustainable competitive advantageþthe reason why some firms consistently enjoy higher performance than their rivals. If Mintzberg's (1978) definition of strategy as ``a pattern in a stream of decisions'' is adopted, then the interesting issue for research is understanding the activities or decisions that over time contribute to the development of competitive advantage and high performance.

The strategic management field is beginning to appreciate the impact that resource accumulation decisions can have on firm performance levels. The importance of firm-specific capabilities and resources was demonstrated by Cool and Schendel (1988) who found that firms in the same environmental settings pursuing the same strategies had widely varying levels of performance. Lawless, Bergh, and Wilsted (1989) argued that these performance differences resulted from differences in organizational capabilities. In a sample of manufacturing firms, they found significant differences in capabilities and resources across firms pursuing the same strategies, and they also found a significant relationship between these capabilities and firm performance.

One way to explore the performance implications of firm-specific capabilities is through the resource based view of the firm (Barney, 1991; Wernerfelt, 1984). This perspective is rooted in the seminal work of Penrose (1959), who suggested that firms could be viewed as collections of productive resources. While researchers have only begun to explore the implications of this perspective, the most important observation to emerge is a recognition that firms will enjoy a competitive advantage only if their resources and capabilities are unique.

The Asymmetric Nature of Competitive Advantage

The need for asymmetry in resource configurations across firms is a key theme running through the resource based literature. Wernerfelt identifies a wide variety of tangible and intangible resources as potential sources of competitive advantage, but he also argues that resources will only contribute to the development of competitive advantage if they are associated with ``resource position barriers'' that prevent replication by competitors. The rationale behind this argument is obvious: Without some isolating mechanism to prevent acquisition or replication of rent producing resources, competing firms will acquire these same resources and competitive advantage will disappear.

In an important contribution to this research dialogue, Dierickx and Cool (1989) emphasized that competitive advantage is most likely to result from the development of unique asset stocks that are built up through an ongoing process of critical resource accumulation. They suggest that five factors contribute to the development of valuable asset stocks. Each of the following factors increases the difficulty of imitation, thereby enhancing its potential for contributing to sustained competitive advantage.

TIME. The firm that builds an asset stock through continuous investments over many years may enjoy advantages over other firms that attempt to replicate this asset through larger investments made over a shorter time period. An analogy is the advantage a student who studies consistently throughout the semester enjoys over other students who attempt to cram an entire semester's worth of study into the week before the final exam.

ASSET MASS EFFICIENCIES. The concept of asset mass efficiencies is summarized by the expression, ``success breeds success.'' Possessing a relatively high level of an asset makes subsequent additions to that asset easier. For example, a firm enjoying a reputation for a highly-skilled work force may find that the prestige associated with working at the firm makes subsequent recruiting of talented employees easier.

INTERCONNECTEDNESS OF ASSET STOCKS. The ability to augment a particular asset stock may be tied to or depend on the levels of other asset stocks. For example, a firm's technological capability may depend on its customer service capability if it operates in an environment where customer requests and suggestions are an important source of information about future technological requirements.

ASSET EROSION. Because all asset stocks deteriorate without sustained investment, resources and capabilities must be replenished if they are to continue to serve as the source of competitive advantage.

CAUSAL AMBIGUITY. The first four factors, either individually or in combination with other factors, can contribute to the development of competitive advantage. The likelihood of maintaining sustained competitive advantage is greatly enhanced, however, if resources or capabilities are shrouded in causal ambiguity. The inability to determine how or why a firm is enjoying a competitive advantage will obviously greatly complicate the efforts of competitors attempting to imitate the firm's success.

Research on Competitive Advantage

While the resource based view suggests many provocative avenues for research, it also presents researchers with some serious challenges that will require moving beyond current methodologies. First, the study of the resource accumulation process requires longitudinal data if researchers are to appreciate how resource acquisition decisions have contributed over time to the development of competitive advantage. Longitudinal studies require access to and the collection of data over many years. While the availability of data is often limited, previous researchers have demonstrated the viability of using longitudinal data collected post hoc. For example, Hall (1984) gathered and used 20 years of data in his longitudinal study of the decline of the . Mintzberg and Waters (1982) conducted an insightful longitudinal study of a family-owned retail firm relying primarily on data gleaned from interviews and corporate records. Given the emphasis on asymmetry, researchers pursuing research on competitive advantage must also focus on the unique. Aharoni (1993) urges researchers to study outliersþthose firms that consistently enjoy especially high or especially low performance relative to industry averages. Unfortunately, traditional statistical analysis techniques are not well suited for the study of outliers. Regression involves fitting a line that best represents the relationship between the dependent and independent variables, but regression cannot capture information on outliers. In fact, outliers are often discarded from samples because of the undue influence they exert on the regression line. Clearly the resource based approach requires the use of alternative statistical and methodological techniques.

Finally, the search for resources and capabilities that contribute to sustained competitive advantage will compel researchers to look for and evaluate a very different set of variables. The resource based view suggests that easily imitated resources are unlikely to be the source of competitive advantage. Spending on R&D can be easily duplicated and is therefore unlikely, by itself, to contribute to the development of competitive advantage. A successful company's R&D process, however, may be much more difficult for competitors to imitate. As Corcoran argues, the success of innovation and product development efforts ``lies not with `research' but with how research, or more precisely innovation, is managed'' (1992:103). The resource based view suggests that researchers will have to do more field studies to uncover the less obvious, unique sources of competitive advantage.

Conclusion

The resource based view of the firm provides an intriguing perspective for conducting research on competitive advantage. The approach emphasizes that competitive advantage results from unique configurations of resources that are accumulated over time to develop organizational processes that give rise to consistent performance differences. Yet, the approach presents a number of methodological challenges including access to longitudinal data, the need for new statistical analysis techniques, and a search for organizational variables associated with competitive advantage. Still, the potential rewards far exceed these difficulties, and offer the promise of worthwhile advances in our understanding of competitive advantage.

References

Aharoni, Y. 1993. In search for the unique: Can firm-specific advantages be evaluated? , 30: 31-49.

Barney, J.B. 1991. Firm resources and sustained competitive advantage. , 17: 99-120.

Cool, K., & Schendel, D. 1988. Performance differences among strategic group members. , 9: 207-223.

Corcoran, E. 1992. Redesigning research. , June: 102-110.

Dierickx, I., & Cool, K. 1989. Asset stock accumulation and sustainability of competitive advantage. , 35: 1504-1511.

Hall, R.I. 1984. The natural logic of management policy making: Its implications for the survival of an organization. , 30: 905-927.

Lawless, M.W., Bergh, D.D., & Wilsted, W.D. 1989. Performance variations among strategic group members: An examination of individual firm capability. , 15: 649-661.

Mintzberg, H. 1978. Patterns in strategy formation. , 24: 934-948.

Mintzberg, H., & Waters, J.A. 1982. Tracking strategy in an entrepreneurial firm. , 25: 465-499.

Wernerfelt, B. 1984. A resource-based view of the firm. , 5: 171-180.

LARRY STIMPERT is an assistant professor of management at Michigan State University. He received his M.B. A. in finance from Columbia University and his Ph.D. in business administration from the University of Illinois. He has also worked for Norfolk Southern Corpation and the Chicago and North Western Transportation Company in various marketing positions.