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Evidence on Competitive Advantage and Superior Stock Market Performance

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Author Info

  • Gjerde, Øystein

    ()
    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

  • Knivsflå, Kjell Henry

    ()
    (Dept. of Accounting, Auditing and Law, Norwegian School of Economics and Business Administration)

  • Sættem, Frode

    ()
    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

Abstract

This article analyzes the value-relevance of industry-based and resource-based competitive advantage in a large sample of firms listed on the Oslo Stock Exchange. We measure competitive advantage by a single variable and perform a new decomposition into its underlying sources. In 1986-2005, the industry-based and the resource-based competitive advantage explain more than 20% of abnormal stock market returns, accumulated over five years. The resource-based advantage is almost four times more important than the industry-based advantage. Differences in both the return and the risk capability of firms’ net assets relative to their industry peers are significant parts of the resource-based advantage, estimated at 60% and 40%, respectively.

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Bibliographic Info

Paper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2009/11.

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Length: 51 pages
Date of creation: 20 Oct 2009
Date of revision:
Handle: RePEc:hhs:nhhfms:2009_011

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Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
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Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
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Keywords: Competitive advantage; superior performance; value-relevance of performance metrics;

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  1. Sophia Rabe-Hesketh & Anders Skrondal, 2012. "Multilevel and Longitudinal Modeling Using Stata, 3rd Edition," Stata Press books, StataCorp LP, edition 3, number mimus2, April.
  2. MacKinnon, James G. & White, Halbert, 1985. "Some heteroskedasticity-consistent covariance matrix estimators with improved finite sample properties," Journal of Econometrics, Elsevier, vol. 29(3), pages 305-325, September.
  3. Juan Carlos Bou & Albert Satorra, 2003. "The persistence of abnormal returns at industry and firm levels," Economics Working Papers 729, Department of Economics and Business, Universitat Pompeu Fabra.
  4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  5. Cramer, J. S., 1987. "Mean and variance of R2 in small and moderate samples," Journal of Econometrics, Elsevier, vol. 35(2-3), pages 253-266, July.
  6. Gabriel Hawawini & Venkat Subramanian & Paul Verdin, 2003. "Is performance driven by industry or firm-specific factors? A new look at the evidence," ULB Institutional Repository 2013/14188, ULB -- Universite Libre de Bruxelles.
  7. Schmalensee, Richard., 1984. "Do markets differ much?," Working papers 1531-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  8. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
  9. Villalonga, Belen, 2004. "Intangible resources, Tobin's q, and sustainability of performance differences," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 205-230, June.
  10. Connolly, Robert A. & Schwartz, Steven, 1985. "The intertemporal behavior of economic profits," International Journal of Industrial Organization, Elsevier, vol. 3(4), pages 379-400, December.
  11. Gabriel Hawawini & Venkat Subramanian & Paul Verdin, 2005. "Is performance driven by industry or firm-specific factors? A response to McNamara, Aime and Vaaler," ULB Institutional Repository 2013/14192, ULB -- Universite Libre de Bruxelles.
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