Management Papers

Document Type

Journal Article

Date of this Version

10-2017

Publication Source

Strategic Management Journal

Volume

38

Issue

10

Start Page

1964

Last Page

1985

DOI

10.1002/smj.2633

Abstract

Research summary: We develop and apply a new set of empirical tools consistent with the tenets of value-based business strategies, leveraging the principle that “no good deal comes undone” and the methods of revealed preferences, to empirically estimate drivers of value creation. We demonstrate how to use these tools in an analysis of value creation in buyer–supplier relationships in the UK corporate legal market. We show that our approach can uncover evidence of subtle mechanisms that traditional methods cannot easily distinguish from each other. Furthermore, we show how the estimates can be used as parameters of biform games for out-of-sample analyses of strategic decisions. With readily available data on relationships between firms, this approach can be applied to many other contexts of interest to strategy researchers.

Managerial summary: Managers need to understand the drivers of value creation for customers in order to make competitive positioning decisions and understand when they can capture value under competition. However, estimates of the relative importance of each driver are typically difficult to obtain. In this article, we help remedy this problem by demonstrating a novel method that obtains estimates of the contribution of various drivers of value creation from commonly available data of buyer–supplier relationships. These estimates can then be used to inform the strategy-making process.

Copyright/Permission Statement

This is the peer reviewed version of the following article: O. Chatain & D. Mindruta (2017) "Estimating Value Creation From Revealed Preferences: Application to Value-Based Strategies", which has been published in final form at http://dx.doi.org/10.1002/smj.2633. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving [http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms]

Keywords

value-based strategy, revealed preferences, cooperative game theory, buyer–supplier relationships, client-specific economies of scope

Embargo Date

2-15-2018

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Date Posted: 19 February 2018

This document has been peer reviewed.