Management Papers

Document Type

Journal Article

Date of this Version

11-2011

Publication Source

Strategic Management Journal

Volume

32

Issue

11

Start Page

1206

Last Page

1231

DOI

10.1002/smj.939

Abstract

We use a formal value-based model to study how frictions—incomplete linkages in the industry value chain that keep some parties from meeting and transacting—affect value creation and value capture. Frictions arise from search and switching costs and moderate the intensity of industry rivalry and the efficiency of the market. We find that firms with a competitive advantage prefer industries with less, but not zero, frictions. We show that rivalry interacts nontrivially with other competitive forces to affect industry attractiveness. Firm heterogeneity emerges naturally when we introduce resource development. Heterogeneity falls with frictions, but the sustainability of competitive advantage increases. Overall, we show that introducing frictions makes value-based models very effective at integrating analyses at the industry, firm, and resource levels.

Copyright/Permission Statement

This is the peer reviewed version of the following article: Chatain, O. and Zemsky, P. (2011), Value creation and value capture with frictions. Strat. Mgmt. J., 32: 1206–1231., which has been published in final form at doi: 10.1002/smj.939. 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, biform games, industry analysis, rivalry, sustainable competitive advantage

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Date Posted: 27 November 2017

This document has been peer reviewed.