Chapter 11 Flashcards
What does a firms ability to create superior value depend on
Its stock resources and distinctive capabilities
What are stock resources
Firm-specific assets and Factors of production, such as patents, brand-name reputation, installed base, and human assets
What are distinctive capabilities
Activities that the firm does better than competitors
What is the resource-based theory of the firm
This theory points out that if all firms in a market have the same stocks of resources and capabilities, no strategy for value creation is available to one firm that would not also be available to all other firms in the market
A competitive advantage regarding the resource based theory is
A competitive advantage must be underpinned by resources and capabilities that are scarce and imperfectly mobile
What does imperfectly mobile mean
This means that a resource cannot sell itself to the highest bidder
Explain the term isolating mechanisms
The term isolating mechanisms refer to the economic force that limit the extent to which a competitive advantage can be duplicated or neutralized through the resource-creation activities of other firms.
What types of isolating mechanisms are there
Impediments to Imitation
Early-mover advantages
Explain Impediments to imitation in regards to isolating mechanisms
These isolating mechanisms impede existing firms and potential entrants from duplicating the resources and capabilities that form the basis of the firm’s advantage
Explain Early-mover Advantages in regards to isolating mechanisms
Once a firm acquires a competitive advantage, these isolating mechanisms increase the economic power of that advantage over time
What are the four impediments to imitation
Legal restrictions
Superior acces to inputs or customers
markets size and scale economies
Intangible barriers to imitating a firms distinctive capabilities
Explain the winners curse
If a company overbids the estimate, it will probably paid too much
What are the three Intangible Barriers to imitation
Causal ambiguity
Dependence on historical circumstances
Social complexity
Explain the 4 isolating mechanisms that fall under early mover advantage
Learning curve
Reputation and buyer uncertainty
Buyer switching costs
Network effects
Explain the Innovators dilemma
The concept of the innovators dilemma raises a fundamental question about sustainability: are large firms doomed to be less innovative than smaller rivals
