Random Walks and Sustained Competitive Advantage

Denrell, Jerker (2004) Random Walks and Sustained Competitive Advantage. In: Winter Strategy Conference, March 2004, Park City, Utah. (Unpublished)

Full text not available from this repository.

Abstract

Strategy is concerned with sustained interfirm profitability differences. Observations of such sustained differences
are often attributed to unobserved systematic a priori differences in firm characteristics. This paper
shows that sustained interfirm profitability differences may be very likely even if there are no a priori differences
among firms. As a result of the phenomenon of long leads in random walks, even a random resource
accumulation process is likely to produce persistent resource heterogeneity and sustained interfirm profitability
differences. A Cournot model in which costs follow a random walk shows that such a process could produce
evidence of substantial persistence of profitability. The results suggest that persistent profitability does
not necessarily provide strong evidence for systematic a priori differences among firms. Nevertheless, since the
phenomenon of long leads is highly unrepresentative of intuitive notions of random sequences, such evidence
may still be persuasive.

Item Type: Conference or Workshop Item (Paper)
Keywords: Sustained competitive advantage; Resource-based view; Random walks; Luck
Subject(s): Strategy; Entrepreneurship & Global business
Centre: Faculty of Strategy, Entrepreneurship and International Business
Date Deposited: 05 Mar 2012 21:32
Last Modified: 23 Oct 2015 14:06
URI: http://eureka.sbs.ox.ac.uk/id/eprint/2431

Actions (login required)

Edit View Edit View