Raphael Amit & Paul Schoemaker – 1993, SMJ

STRATEGIC ASSETS AND

ORGANIZATIONAL RENT

Conditions that lead to sustainable economic rents Asymmetry between firm knowledge / resources

Examine links between… Industry analysis framework Resource-based view Behavioral decision biases Organizational implementation issues

“…Connect the concept of Strategic Industry Factors at the market level with the notion of Strategic Assets at the fi rm level.”

ARTICLE OVERVIEW

Firm-specifi c resources and capabilities are used to explain a fi rm’s performance (uniqueness, customer-base, profi ts, etc.)

Ex ante decisions characterized by Uncertainty

Environment Competitor’s behavior Customer preferences

Complexity Environments & perceptions

Intra-organizational conflicts Amongst managers / departments or divisions

EXPLAINING DECISION MAKING 1.0

Difficult to model /

articulate

But clearly more than

just firm-side resources & capabilities

RESOURCE BASED VIEW

FIRM

Resources: - externally available & transferable - owned / controlled by firm - convertible

Capabilities: - information based - firm specific - tangible or intangible - intermediate goods

Strategic Assets

INDUSTRY

?

Key Success Factors (Vasconcellos and Hambrick, 1989) - By product of empirical, ex post test of an

organization’s success as it depends on matching strengths with its environment

Firms with the highest KSF outperform their rivals

KSF Limitations Considers industry as primary unit of analysis, where

decisions are made my managers from a firm perspective

Looks at everything ex post, whereas decisions are made ex ante

KSF are relative between firms (i.e. they all can’t score well)

INDUSTRY VIEW

Strategic Industry Factors –

Resources and capabilities which are dependant on market failures

Characterized by their proneness to market failures and asymmetric distributions across firms

Determined at the market level through interactions between competitors, customers, regulators, innovators, etc.

Allows for ex ante explanations for decision making

INDUSTRY VIEW

FIRM AND INDUSTRY CONSTRUCTS

FIRM

Resources: - externally available & transferable - owned / controlled by firm - convertible

Capabilities: - information based - firm specific - tangible or intangible - intermediate goods

Strategic Assets

INDUSTRY

Strategic Industry Factors: - industry specific - affect industry profitability - change & subject to ex ante uncertainty

Rivals

CustomersSubstitutes

Environmental Factors

Suppliers

Entrants

Managers must identify ‘strategic assets’ (resources and capabilities) in order to generate sustainable advantage and organizational rents This involves identifying ‘strategic industry factors’

for the present and future

But what about Behavioral Decision Theory?

EXPLAINING DECISION MAKING 2.0

Managers must (subjectively / with bias)… Anticipate possible futures Assess competitive interactions Overcome organizational inertia

BDT builds on the resource based view by acknowledging bounded rationality and diff erences in problem framing (or ‘variable rationality’) when dealing with Uncertainty Complexity Conflict

BEHAVIORAL DECISION THEORY

Standard ‘Strategic Assets’ theory fails to systematically lead to the creation of sustainable rents due to industry pressures

Strategic Industry Factors allow for a ‘multidimensional view’ to making decisions Industry analysis Resource perspective Behavioral decision theory

This, in turn, allows for the development of resources and capabilities into sustainable organizational rents by taking market & knowledge imperfections and management subjectivity into account

EXPLAINING DECISION MAKING 3.0