The Economics of Strategic Opportunity

Denrell, Jerker, Fang, Christina and Winter, Sidney G (2003) The Economics of Strategic Opportunity. Strategic Management Journal, 24 (10). pp. 977-990.

Abstract

As emphasized by Barney (1986), any explanation of superior profitability must account for why
the resources supporting such profitability could have been acquired for a price below their
rent-generating capacity. Building upon the literature iti economics on coordination failures
and incomplete markets, we suggest a framework for analyzing such strategic factor market
inefficiencies. Our point of departure is that a strategic opportunity exists whenever prices fail
to reflect the value of a resource's best use. This paper examines the challenges of imputing a
resource's value in the absence of explicit price guidance and suggests the likely characteristics of
strategic opportunities. Our framework also suggests that the discovery of strategic opportunity
is often a matter of 'serendipity' and access to relevant idiosyncratic resources. This latter
observation provides prescriptive advice, although the analysis also explains why more detailed
guidance has to be firm specific.

Item Type: Article
Keywords: resource valuation; strategic factor markets; imputation; arbitrage; serendipity; resource-based view
Subject(s): Strategy; Entrepreneurship & Global business
Centre: Faculty of Strategy, Entrepreneurship and International Business
Date Deposited: 26 Oct 2011 11:40
Last Modified: 23 Oct 2015 14:05
URI: http://eureka.sbs.ox.ac.uk/id/eprint/1000

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