Part 7 Flashcards
Resource-based Theory of the Firm
Explains sustained comp. advantage in terms of heterogeneity in resources & capabilities
Resources and capabilities have to be…
- Scarce
- Imperfectly mobile
- Unavailable in the open market
Cospecialisation:
A firm’s resources are uniquely valuable in combination
Tangible resources:
- Organisational resources
- Physical resources
- Technological resources
Intangible Resources
- Human resources (knowledge, trust, organ. routine)
- Innovation resources (ideas, scientific knowledge)
- Reputation resources (brand name, perception)
Capabilities (examples)
- Distribution
- Human resources
- Marketing
- Management
- Manufacturing
- RD
Impairments to Imitation
Impede potential entrants from duplicating resources and cap. of incumbent
(legal restrictions, superior access to input/consumers, market size, economies of scale, intangible barriers)
Early Mover Advantage
1) Learning Curve
2) Reputation, Buyer Certainty
3) Switching costs
4) Network effects
Actual vs. Virtual Networks
1) Arise from how many people use the product/service
2) Arise from the use of complementary goods
Early Mover Disadvantages
- not enough complementary goods developed yet
- technology might not be as good as of followers
- likely to make most mistakes as first one in a market
Innovation can be..
1) Product Innovation
2) Process Innovation
Innovation 2 types:
a) Incremental
b) Radical
Discontinuities are
small shocks due to incremental innovation
Disruptive technologies –
Markets become clear of less efficient processes and org. forms are displaced (higher B-C bc of a much LOWER C); MP3 replacing CDs
Hypercompetition
Firms constantly seek comp, advantage; Apple & Samsung products
According to Schumpeter…
tech. improvement & long-term economic growth are MORE important than an optimal allocation of resources
Dynamic vs Static Efficiency
Society benefits more from competition between products, than from price competition (argument to defend monopoly)
Innovator’s Dilemma
innovation by incumbents may cannibalise their successful business model, while failure to innovate may invite entry
When not to innovate (effects):
1) Sunk cost effect (profit max. firm sticks to current technology, even though a new profit max. firm would choose a different option)
2) Replacement effect (entrant is more willing to spend on innovation as they can replace the incumbent, whereas the incumbent has nobody to replace)
3) Efficiency effect (monopolist has more to lose from another firm’s entry than the firm can gain from entering a market, so monopolist has a larger incentive to invest)
Productivity effect:
large firm may take advantage of scope economics and be more productive at research
