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Evidence on competitive advantage and superior stock market performance

Author

Listed:
  • Øystein Gjerde

    (Norwegian School of Economics and Business Administration, Bergen, Norway)

  • Kjell Knivsflå

    (Norwegian School of Economics and Business Administration, Bergen, Norway)

  • Frode Sættem

    (Norwegian School of Economics and Business Administration, Bergen, Norway)

Abstract

This article analyzes the value-relevance of industry-based and resource-based competitive advantage in a large sample of firms listed on the Oslo Stock Exchange. We measure competitive advantage by a single variable and perform a new decomposition into its underlying sources. In 1986-2005, the industry-based and the resource-based competitive advantage explain more than 20% of abnormal stock market returns, accumulated over 5 years. The resource-based advantage is almost 4 times more important than the industry-based advantage. Differences in both the return and the risk capability of firms' net assets relative to their industry peers are significant parts of the resource-based advantage, estimated at 60 and 40%, respectively. Copyright © 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • Øystein Gjerde & Kjell Knivsflå & Frode Sættem, 2010. "Evidence on competitive advantage and superior stock market performance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(4), pages 277-301.
  • Handle: RePEc:wly:mgtdec:v:31:y:2010:i:4:p:277-301
    DOI: 10.1002/mde.1488
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    References listed on IDEAS

    as
    1. Juan Carlos Bou & Albert Satorra, 2003. "The persistence of abnormal returns at industry and firm levels," Economics Working Papers 729, Department of Economics and Business, Universitat Pompeu Fabra.
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    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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