Professor of Strategy
Value-based Strategy; Biform Games; Industry Analysis; Rivalry; Sustainable Competitive Advantage; Corporate Governance; Value Creation, Strategy and Implementation;
The authors 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.The authors 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, the authors show that introducing frictions makes value-based models very effective at integrating analyses at the industry, firm, and resource levels.