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COMPETITIVE ADVANTAGE AND FIRM PERFORMANCE

COMPETITIVE ADVANTAGE AND FIRM PERFORMANCE Competitive advantage is perhaps the most widely used term in strategic management, yet it remains poorly defined and operationalized. This paper makes three observations regarding competitive advantage and conceptually explores the various patterns of relationship between competitive advantage and firm performance. First, competitive advantage does not equate to superior performance. Second, competitive advantage is a relational term. Third, it is contextspecific. This paper examines three patterns of relationship between competitive advantage and firm performance 1 competitive advantage leading to superior performance 2 competitive advantage without superior performance, and 3 superior performance without competitive advantage. The ultimate purpose of this article is to help generate a healthy debate among strategy scholars on the usefulness of the competitive advantage construct for our theory building and testing. This paper proposes that we reexamine the notion of competitive advantage and formally assess its usefulness for theory building and testing in the field of Strategic Management. The notion of competitive advantage has been a cornerstone of our field. As such, research on competitive advantage occupies a central position in strategy literature e.g., Porter, 1980, 1985 Rumelt, 1984, 1987 Barney, 1986, 1991 Ghemawat, 1986, 1991 Peteraf, 1993 Teece, Pisano, & Shuen, 1997. However, the notion of competitive advantage itself has rarely been systematically addressed and, to date, remains poorly defined and operationalized. Is competitive advantage what it takes to compete, a characterization observed during competition, or an outcome of competition Is competitive advantage contingent on the competitive situation or is it a more general trait of the firm Put differently, how is competitive advantage different from competence, strengths and, ultimately, performance This article, addressing the above questions, makes three observations regarding competitive advantage. First, competitive advantage does not equate to superior performance. Second, competitive advantage is a relational construct. Third, competitive advantage is contextspecific. In presenting these three observations, this article proposes suggestions to refine and operationalize competitive advantage. It then conceptually explores the relationship between competitive advantage and performance, which is argued to be much more complex than it is currently being treated in the literature. Concluding remarks follow. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Competitiveness Review: An International Business Journal incorporating Journal of Global Competitiveness Emerald Publishing

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1059-5422
DOI
10.1108/eb046396
Publisher site
See Article on Publisher Site

Abstract

Competitive advantage is perhaps the most widely used term in strategic management, yet it remains poorly defined and operationalized. This paper makes three observations regarding competitive advantage and conceptually explores the various patterns of relationship between competitive advantage and firm performance. First, competitive advantage does not equate to superior performance. Second, competitive advantage is a relational term. Third, it is contextspecific. This paper examines three patterns of relationship between competitive advantage and firm performance 1 competitive advantage leading to superior performance 2 competitive advantage without superior performance, and 3 superior performance without competitive advantage. The ultimate purpose of this article is to help generate a healthy debate among strategy scholars on the usefulness of the competitive advantage construct for our theory building and testing. This paper proposes that we reexamine the notion of competitive advantage and formally assess its usefulness for theory building and testing in the field of Strategic Management. The notion of competitive advantage has been a cornerstone of our field. As such, research on competitive advantage occupies a central position in strategy literature e.g., Porter, 1980, 1985 Rumelt, 1984, 1987 Barney, 1986, 1991 Ghemawat, 1986, 1991 Peteraf, 1993 Teece, Pisano, & Shuen, 1997. However, the notion of competitive advantage itself has rarely been systematically addressed and, to date, remains poorly defined and operationalized. Is competitive advantage what it takes to compete, a characterization observed during competition, or an outcome of competition Is competitive advantage contingent on the competitive situation or is it a more general trait of the firm Put differently, how is competitive advantage different from competence, strengths and, ultimately, performance This article, addressing the above questions, makes three observations regarding competitive advantage. First, competitive advantage does not equate to superior performance. Second, competitive advantage is a relational construct. Third, competitive advantage is contextspecific. In presenting these three observations, this article proposes suggestions to refine and operationalize competitive advantage. It then conceptually explores the relationship between competitive advantage and performance, which is argued to be much more complex than it is currently being treated in the literature. Concluding remarks follow.

Journal

Competitiveness Review: An International Business Journal incorporating Journal of Global CompetitivenessEmerald Publishing

Published: Feb 1, 2000

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