Professor of Strategy
Journal Article | Management Science | 53 | April 2007
The Timing of Resource Development and Sustainable Competitive Advantage
The authors develop a formal model of the timing of resource development by competing firms. The aim is to deepen and extend resource-level theorizing about sustainable competitive advantage.This analysis formalizes the notion of barriers to imitation, particularly those based on time compression diseconomies where the faster a firm develops a resource the greater the cost. Time compression diseconomies are derived from a micro-model of resource development with diminishing returns to effort.The authors use a continuous time model of the flows of development costs and market revenues, which allows to integrate strategic and financial analyses of firm investment problems.The authors examine two dimensions of sustainability: whether the resources underlying a firm's competitive advantage are economically imitable, and if so, how long imitation takes. Surprisingly, the authors show that sustainable competitive advantage does not necessarily lead to superior performance.The authors find that imitators sometimes benefit from reductions in their absorptive capacity and that innovators should license either all or none of their knowledge. Despite recent criticisms, the authors reaffirm the usefulness of a resource-level of analysis for strategy research, especially when the focus is on resources developed through internal projects with identifiable stopping times.