Next, integrating high strength and low weakness sets (robust advantage) and integrating high strength and high weakness sets (precarious advantage) positively affect relative performance. The latter finding runs contrary to the net-offset logic and, instead, supports our arguments pertaining to efficient investments. That is, a discriminating investment strategy that maximizes some capabilities at the expense of others can be beneficial, yet entails risk. While high performance is possible with both approaches, a precarious advantage produces much more performance variation than a robust advantage. Moreover, it is likely that a precarious advantage is less durable because the high level of weaknesses makes the firm vulnerable to rivals’ attacks. Research in competitive dynamics suggests that rivals are more likely to attack when they perceive a higher probability of success (Chen et al., 2007; Hitt et al., 2009). Therefore, firms holding a precarious advantage could benefit by directing profits toward the elimination of weaknesses, thereby reducing their vulnerability to attacks and prolonging their advantage.
In total, these results underscore the importance of having a more complete understanding of the bases of competitive advantage. There is more to realizing a competitive advantage—even temporary advantage—than most previous research has suggested. Instead of focusing exclusively on strengths, our research suggests that the focus should expand. Specifically, sets of strengths, sets of weaknesses, and their integration should be considered. Incorporating weaknesses along with strengths enhances the efficacy of RBV logic with respect to competitive advantage. Moreover, as Figure 3 shows, the contours of the response surface suggest a dynamic relationship between strength and weakness sets. For example, decreasing weakness is positive when a firm possesses low levels of strength, but negative (or neutral, because the coefficients for the precarious and robust advantages are not statistically different) when possessing high levels of strength. This indicates the value of understanding how strength and weakness sets affect performance in a range of conditions.
To understand the dynamics related to the durability of advantages, we also examined how environmental and firm-based factors affect changes in the capability sets. Through this, we studied exogenous and endogenous antecedents of temporary advantage. Theory suggests that prior performance and environmental munificence likely influence change in a firm’s strength and weakness sets over time. Understanding these influences is important because continuous investments by rivals, even indirect rivals, in the development of their capabilities results in a dynamic marketplace where current competitive advantages can be lost.
First, the results show that initial levels of strength and weakness sets are strong indicators of change in a firm’s strength and weakness sets over time. Thus, a strong parity effect occurs among rivals. Firms put forth significant effort to gain ground on major competitors by increasing their own capability strengths and eliminating capability weaknesses. If these variables were not significant predictors, it would suggest that an advantage hierarchy is present and resistant to change, but this is not the case. Also, reviewing the distribution of strength and weakness sets across time shows that while individual firms jockey, either losing or gaining advantage as they adjust their capabilities, the overall distribution of advantage in the market space remains stable. In other words, competing in an age of temporary advantage does not mean competitive advantage is impossible; rather it means maintaining a differentiated stock of capabilities is difficult in dynamic markets.
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