The Economics of Strategic Opportunity
AbstractAs emphasized by Barney (1986), any explanation of superior profitability must account for why the resources supporting such profitability could have been acquired for a price below their rent generating capacity. Building upon the literature in economics on coordination failures and incomplete markets, we suggest a framework for analyzing such strategic factor market inefficiencies. Our point of departure is that a strategic opportunity exists whenever prices fail to reflect the value of a resource's best use. This paper examines the challenges of imputing a resource's value in the absence of explicit price guidance and suggests the likely characteristics of strategic opportunities. Our framework also suggests that the discovery of strategic opportunity is often a matter of serendipity and access to relevant idiosyncratic resources. This latter observation provides prescriptive advice, although the analysis also explains why more detailed guidance has to be firm specific.
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Bibliographic InfoPaper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2003/10.
Date of creation: 12 Dec 2003
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-04-04 (All new papers)
- NEP-CBE-2004-04-04 (Cognitive & Behavioural Economics)
- NEP-ENT-2004-04-04 (Entrepreneurship)
- NEP-INO-2004-04-04 (Innovation)
- NEP-TID-2004-04-04 (Technology & Industrial Dynamics)
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