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Creating, Capturing and Protecting Value: A Property Rights-based View of Competitive Strategy

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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, so that 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. We argue that economizing with transaction costs become a distinct source of value, and potentially of sustained competitive advantage in such a setting. Strategizing revolves 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 Department of Industrial Economics and Strategy, Copenhagen Business School in its series IVS/CBS Working Papers with number 2002-03.

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Handle: RePEc:ivs:iivswp:02-03

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Web page: http://www.cbs.dk/forskning_viden/fakulteter_institutter_centre/institutter/oekonomi/ivs/

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  1. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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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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