Strategic Management Journal. Antecedents of temporary advantage, страница 9

The early roots of performance-related temporary advantages

When the RBV arrived on the scene, its mere existence implied that industry effects may not be as important as firm-specific resources. So a debate raged on about the relative importance of the two effects. Researchers began decomposing performance (usually returns) into their industry- and firm-specific effects, with varying results about the relative importance (Schmalensee, 1985, 1987; McGahan and Porter, 1997, 1999, 2003; Rumelt, 1991; Hawanini, et al., 2003). Some of the studies even broke industry effects into persistent and temporary effects, so as to separate the effects of transient shocks to an industry from the long-term industry effects from stable industry structure. The door was open for looking at temporary performance versus long-term performance as evidence of temporary and long-term advantage.

Ruefli and Wiggins (2003) critiqued these empirical studies of performance as an indicator of sustainable competitive advantage because most of them scrutinized only limited time frames and did not tackle the important issue of the inability of individual superior performers to sustain their performance levels. More specifically, they wished to examine if superior performance persisted or was volatile. In consonance with D'Aveni (1994), they predicted that if there had been a hypercompetitive shift toward more temporary advantage, they would find that superior performers were falling more frequently into mediocre performance levels and that the duration of time superior performance would decline (Wiggins and Ruefli, 2005). Their research found both.

Using different methods that decomposed accounting returns into a long-term portion (similar to a 10-year average) and a short-term component (volatility around the average), Thomas and D'Aveni (2009) found that the volatility of performance had increased over time, suggesting that the temporary component of competitive advantage was becoming much more important. Thomas and D'Aveni (2009) not only found that the volatility of returns for all publicly traded U.S. manufacturing firms was rising from 1950 to 2002, but that this rise in volatility was also associated with the rising within-industry heterogeneity of returns and the impact of industry effects. These results suggested that the hypercompetitive shift is more than just an increase in the presence of temporary advantage (as predicted by D'Aveni, 1994, based on his anecdotal study), but was also associated with the rising effects of firm-specific resources and the declining effect of industry effects. One underlying cause may be driving a hypercompetitive shift in all three.

Meanwhile, consider the research denying the existence of hypercompetition (defined by D'Aveni, 1994: 2 as ‘an environment of fierce competition leading to unsustainable advantage or the decline in the sustainability of advantage’). One study focused on an industry still under the influence of quasi-collusive pricing rules of thumb and unsurprisingly found that the industry was not hypercompetitive (Makadok, 1998). And a second study defined hypercompetition as a non-munificent environment lacking in resources somewhat akin to a recession and found there had been many recessions in the past, so hypercompetition was just more of the same according to McNamara, Vaaler, and Devers (2003). But this definition of hypercompetition was never intended by D'Aveni (1994). And hypercompetition can lead to prosperity by stimulating growth. Before one can deny the existence of temporary advantages, we must be certain to study a broad set of firms facing varying industry conditions, including (1) a variety of aggressive entrants and competitors and (2) nonprice rivalry and differing industry growth rates and levels of innovation. The goal is to find time spans that illustrate long-lasting periods of unsustainable advantages, rather than a lack of munificence.