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The economics of strategic opportunity

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  • Jerker Denrell
  • Christina Fang
  • Sidney G. 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. Copyright © 2003 John Wiley & Sons, Ltd.

Suggested Citation

  • Jerker Denrell & Christina Fang & Sidney G. Winter, 2003. "The economics of strategic opportunity," Strategic Management Journal, Wiley Blackwell, vol. 24(10), pages 977-990, October.
    • Handle: RePEc:bla:stratm:v:24:y:2003:i:10:p:977-990
    DOI: 10.1002/smj.341
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