Assistant Professor of Strategy
Formal Foundations of Strategy; Profit Persistence; Resource Based View; Dynamic Capabilities; Bayesian Analysis;
Journal Article | Strategic Management Journal | 40 | February 2019
Performance Persistence in the Presence of Higher-Order Resources
This paper presents a formal model of how higher-order resources affect profit persistence. Higher-order resources provide an abstract representation of dynamic capabilities, and are defined as resources that do not affect profit directly, but can affect other resources that in turn affect profit over time.The model shows that higher-order resources lead to persistence not only in the level of profit, but also in its growth.Estimation of the model using empirical profit data of more than 4,000 US firms over 30 years implies an average duration of competitive advantage of about 18 years, which is almost four times as long as implied by traditionally used autoregressive models that exclude the effect of higher-order resources.