Evolution of competitive advantage from the dynamics and context of resources

Mandal, Abhijit (2004) Evolution of competitive advantage from the dynamics and context of resources. Doctoral thesis, University of London: London Business School.

Abstract

This dissertation addressess a considered shortcoming in the process of strategic management regarding the generation of competitive advantage over time. The prevailing equilbrium viewpoint int the resource-based perspective has underplayed the question of how firms and managers build their resources to relatively strong positions to achieve competitive advantage. While past research has focused on the character and identity of resources by themselves, this dissertation analyzes the role of resource heterogeneity and interactions in generating differential performance, over time and consequently, value creation. The analytis is based on an investigation of two branches of an insurance firm that show a divergent performance trajectory. A model, representing the relevant resources (and policies), linked by causal relationships among these resources, is developed. This model is based on prevailing mental models and personal experiences of major participants in the industry and the firm; it is further supported by secondary data. Simulation experiments that progressively involve increased model complexity illuminate the dynamic influence of resource interactions on the context, as well as the systemic impact of initial conditions and resource configurations on the differential accumulaton of critical resources. Specifically, they show that competitive advantage can be generated in the absence of unique resources; differences in resource allocation priorities can lead to differences in performance on the eliminatioin of slack and the critical resource or policy that is necessary for generating competitive advantage is a function of resource complementarity, which can vary with time and resource interactions. Then, it develops a dynamic perspective to the resource-based view. As a contribution to theory, it established the importance of quantification in exploring the dynamic impact of resource combinations and the policies underlying them. It then suggests a structural basis for representing the dynamics of resources that can facilitate this quantificatoin through modelling to resolve diverse dynamic aspects of resources. While emphasizing the role of accumulation it assembles theoretical contributions about how different kinds of resource heterogeneity can create economic value through resource interactions. Another important contribution is to show that competitive advantage can be inherent in the configuration of resources, notwithstanding the role of superior resources and policies. The implication for management is that it designs organizations to take advantage of resource interdependencies to move them in the preferred direction rather than resort to incentives to beat design shortcomings. In addition, management should also monitor selected operational and process targes, not just traditional aggregate measures of performance.