IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Searching for Competitive Advantage in the Black Box

Listed author(s):
  • Flamholtz, Eric
  • Hua, Wei
Registered author(s):

    This paper deals with the sources of potential competitive advantage. It builds upon previous work by Flamholtz (1995) to develop a model of the determinants of organizational success and failure as well as subsequent empirical studies of the link between the model and financial performance ( Flamholtz and Aksehirli, 2000 and Flamholtz and Hua, 2002. The paper discusses the extension of the model from a framework for organizational development to a framework or 'lens' for building competitive advantage. It also hypothesizes that an organization's infrastructure (defined in terms of four of the model's variables) are likely to be the true source of sustainable competitive advantage. Data originally collected for the study reported in Flamholtz and Aksehirli to test the relation between the model and financial performance was utilized to test hypotheses concerning the model and competitive success and sources of competitive advantage. Some of the data derived from the prior study by Flamholtz and Aksehirli, which has not been previously analyzed or reported, was used to identify empirically the sources of competitive advantage, and, in turn, test the hypothesis about the role of infrastructure as the true source of sustainable competitive advantage. Two different statistical methods were used to analyze the hypothesized relationship between the variables included in the Pyramid of Organizational Development and competitive success: (1) the Friedman two-way analysis of variance by ranks and (2) regression analysis. SPSS statistical software was used for both analyses. Results of the Friedman test indicate that ROE scores are significantly associated with total Pyramid of Organizational Development scores. At the significance level of 0.005, higher values of total scores are connected with higher ROE values, and lower total scores are linked with lower ROEs [Siegel (1956)]. To address the issue of the Sources of Potential Strategic Advantage we performed an analysis of the data on strategic organizational development scores shown below in Figure 4 to determine which of the six key variables comprising the Pyramid of Organizational Development actually differentiated one firm from another. As hypothesized, we found different frequencies or proportions of the variables comprising the Pyramid of Organizational Development. We also tested the hypothesis that the key sources of competitive advantage are a firm's infrastructure, rather than its choice of markets and its products, using the Cochran Q Test. The results of this test indicate that the proportions of competitive advantages of each matched pair do differ significantly among the different sources of potential competitive advantages, at a significance level of 0.028. In addition, to test the hypothesis that infrastructure is significantly different from markets and products, we performed a Friedman Two Way Analysis of Variance. This test was significant at 0.014. The empirical analysis above shows a clear relationship between the Pyramid of Organizational Development framework and competitive advantage. This has several significant implications for practicing managers and researchers.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal European Management Journal.

    Volume (Year): 21 (2003)
    Issue (Month): 2 (April)
    Pages: 222-236

    in new window

    Handle: RePEc:eee:eurman:v:21:y:2003:i:2:p:222-236
    Contact details of provider: Web page:

    Order Information: Postal:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:eurman:v:21:y:2003:i:2:p:222-236. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.