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The Economics of Strategic Opportunity

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  • Jerker Denrell
  • Christina Fang
  • Sidney Winter

Abstract

As 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 Info

Paper 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.

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Date of creation: 12 Dec 2003
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Handle: RePEc:ssa:lemwps:2003/10

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  9. Jay B. Barney, 1989. "Asset Stocks and Sustained Competitive Advantage: A Comment," Management Science, INFORMS, vol. 35(12), pages 1511-1513, December.
  10. Kiminiori Matsuyama, 1995. "Economic Development as Coordination Problems," Discussion Papers 1123, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Citations

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Cited by:
  1. Gómez, Jaime & Vargas, Pilar, 2012. "Intangible resources and technology adoption in manufacturing firms," Research Policy, Elsevier, vol. 41(9), pages 1607-1619.
  2. Daniela Baglieri & Gianni Lorenzoni, 2014. "Closing the distance between academia and market: experimentation and user entrepreneurial processes," The Journal of Technology Transfer, Springer, vol. 39(1), pages 52-74, February.
  3. Catherine A. Maritan & Robert E. Florence, 2008. "Investing in capabilities: bidding in strategic factor markets with costly information," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(2-3), pages 227-239.
  4. Foss, Nicolai J. & Klein, Peter G. & Kor, Yasemin Y. & Mahoney, Joseph T., 2006. "Entrepreneurship, Subjectivism, and the Resource-Based View: Towards a New Synthesis," Working Papers 06-0121, University of Illinois at Urbana-Champaign, College of Business.
  5. Wei, Tian & Clegg, Jeremy, 2014. "Successful integration of target firms in international acquisitions: A comparative study in the Medical Technology industry," Journal of International Management, Elsevier, vol. 20(2), pages 237-255.
  6. Andersen, Torben Juul & Foss, Nicolai Juul, 2005. "Strategic opportunity and economic performance in multinational enterprises: The role and effects of information and communication technology," Journal of International Management, Elsevier, vol. 11(2), pages 293-310, June.
  7. Vivek Ghosal, 2009. "Business Strategy and Firm Reorganization under Changing Market Conditions," CESifo Working Paper Series 2673, CESifo Group Munich.
  8. Mircea Epure, 2013. "Benchmarking for Routines and Organizational Knowledge," Working Papers 729, Barcelona Graduate School of Economics.
  9. Roger Schweizer, 2013. "SMEs and networks: Overcoming the liability of outsidership," Journal of International Entrepreneurship, Springer, vol. 11(1), pages 80-103, March.
  10. Kraaijenbrink, Jeroen & Spender, JC & Groen, Aard, 2009. "The resource-based view: A review and assessment of its critiques," MPRA Paper 21442, University Library of Munich, Germany.
  11. Kim, Jongwook & Mahoney, Joseph T., 2008. "A Strategic Theory of the Firm as a Nexus of Incomplete Contracts: A Property Rights Approach," Working Papers 08-0108, University of Illinois at Urbana-Champaign, College of Business.
  12. Yosem Companys & Jeffery McMullen, 2007. "Strategic Entrepreneurs at Work: The Nature, Discovery, and Exploitation of Entrepreneurial Opportunities," Small Business Economics, Springer, vol. 28(4), pages 301-322, April.
  13. Steven Toms, 2010. "Value, profit and risk: accounting and the resource-based view of the firm," Accounting, Auditing & Accountability Journal, Emerald Group Publishing, vol. 23(5), pages 647-670, June.
  14. Dellestrand, Henrik & Kappen, Philip, 2011. "Headquarters Allocation of Resources to Innovation Transfer Projects within the Multinational Enterprise," Journal of International Management, Elsevier, vol. 17(4), pages 263-277.
  15. Dew, Nicholas & Read, Stuart & Sarasvathy, Saras D. & Wiltbank, Robert, 2008. "Outlines of a behavioral theory of the entrepreneurial firm," Journal of Economic Behavior & Organization, Elsevier, vol. 66(1), pages 37-59, April.
  16. Adegbesan, Tunji, 2007. "Strategic factor markets: Bargaining, scarcity, and resource complementarity," IESE Research Papers D/666, IESE Business School.
  17. Gianni Lorenzoni, 2010. "Genesis of a research field: district, network, strategic network," Journal of Management and Governance, Springer, vol. 14(3), pages 221-239, August.
  18. Mouzas, Stefanos & Ford, David, 2006. "Managing relationships in showery weather: The role of umbrella agreements," Journal of Business Research, Elsevier, vol. 59(12), pages 1248-1256, November.
  19. Mouzas, Stefanos, 2006. "Efficiency versus effectiveness in business networks," Journal of Business Research, Elsevier, vol. 59(10-11), pages 1124-1132, October.

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