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Creating, Capturing and Protecting Value A Property Rights-based View of CompetitiveStrategy

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  • Kirsten Foss
  • Nicolai J. Foss

Abstract

This paper develops a property rights-based view of strategy (the “PRV”). A property right (or economic right) is an individual’s net valuation, in expected terms, of the ability to directly consume the services of an asset (including, e.g., a monopoly position) or consume it indirectly through exchange. Resources expended on exchanging, protecting and capturing such rights are transaction costs; thus, we directly link property rights, transaction costs, and economic value. We assume that all relevant exchange is costly and that all agents maximize their property rights. This implies that economizing with transaction costs may be a distinct source of value, and potentially of sustained competitive advantage. Moreover, strategizing may be understood as revolving around influencing impediments (i.e., transaction costs) to value creation. Expectations and contracting also become crucial parts of processes of creating, protecting and capturing value. We use these insights to derive a number of refutable propositions, and argue that key insights from both industrial organization economics and the resource-based view are consistent with the PRV.

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Bibliographic Info

Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 02-02.

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Date of creation: 2002
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Handle: RePEc:aal:abbswp:02-02

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Web page: http://www.druid.dk/

Related research

Keywords: Property rights; transaction costs; industrial organization;

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References

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  1. Harold Demsetz, 1981. "Barriers to Entry," UCLA Economics Working Papers 192, UCLA Department of Economics.
  2. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
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  13. Skaperdas, S., 1991. "Cooperation, Conflict And Power In The Absence Of Property Rights," Papers 90-91-06a, California Irvine - School of Social Sciences.
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  15. Lewis Makowski & Joseph Ostroy, 2010. "Appropriation and Efficiency: A Revision of the First Theorem of Welfare Economics," Levine's Working Paper Archive 1386, David K. Levine.
  16. Barzel,Yoram, 1997. "Economic Analysis of Property Rights," Cambridge Books, Cambridge University Press, number 9780521597135, April.
  17. Adam Brandenburger & Harborne Stuart, 2007. "Biform Games," Management Science, INFORMS, vol. 53(4), pages 537-549, April.
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Cited by:
  1. Nicolai J. Foss, 2002. "The Strategy and Transaction Cost Nexus Past Debates, Central Questions, and Future Research Possibilities," DRUID Working Papers 02-04, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.

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