Academic journal article Journal of East European Management Studies

Interweaving of the Sources and Forms of a Firm's Competitive Advantage: A Critical Review of the Adequacy of Existing Schools of Thought*

Academic journal article Journal of East European Management Studies

Interweaving of the Sources and Forms of a Firm's Competitive Advantage: A Critical Review of the Adequacy of Existing Schools of Thought*

Article excerpt

The paper examines how the sources and forms of competitive advantage interweave and what does this mean for the existing theory on competitive advantage. We found out that all sources of competitive advantage should be classified into external and internal category. Consequently, we believe it is reasonable to discuss only two schools, i.e. the 'internal' school based on resources, capabilities and knowledge and the 'external' school based on the industrial organisation. The relation between them should not be understood as being solely competitive but also complementary, which means that the mystery of creating a competitive advantage cannot be explained by any school alone.

Der Aufsatz untersucht, inwiefern die Ursprunge und Formen van Wettbewerbsvorteilen miteinander verflochten sind und wie sich dies auf die Théorie des Wettbewerbsvorteiles auswirkt. Die Ursprunge des Wettbewerbsvorteiles lassen sich in externe und interne Gruppen einteilen. AIs Konsequenz daraus 1st es sinnvoll, lediglich zwei Ansichten zu diskutieren, die interne ' Lehre, die auf Ressource», Fahigkeiten und Wissen zuruckgreift und die , externe ', die aufder industriellen Organisation basiert. Die Beziehung der zwei Lehren sollte nicht als konkurriend sondern aïs ergànzend aufgefasst werden, was bedeutet, dass das Ràtsel der Schaffung eines Wettbewerbsvorteiles nicht alleine van einer Lehre erklàrt werden kann.

Key words: Firm / competitive advantage / industrial organisation / resources / capabilities / knowledge

1. Introduction

Nowadays, in the era of intense global competition, a discussion on how to enhance a firm's competitiveness in the local and/or global market is probably more relevant than it has ever been. The discussion of the topic takes place literally every day, not only among managers but also among academics, politicians and others. In spite of its relevance, however, the discussion is usually too simplified. It seems that many people do not properly understand how complex the process of competition among firms really is.

In the paper we try to bring the above-mentioned discussion on a higher level, building on a presumption that the process of competition among firms can be described as a causal-consecutive sequence 'sources of competitive advantage, forms of competitive advantage, performance'. In other words, if a firm's primary strategic goal is long-term progress, development and success such firm must first develop certain sources of competitive advantage. Once a firm possesses such sources and knows how to transfer them into at least one form of competitive advantage it can reasonably expect to be successful.

The scientific literature usually discusses four basic schools concerning the sources of competitive advantage, i.e. the industrial organisation school, the resource-based school, the capability-based school and the knowledge-based school, and two fundamental forms of competitive advantage, i.e. lower price (costs) and differentiation. The purpose of this paper is to analyse the interweaving of the sources and forms of a firm's competitive advantage and, based thereon, offer a critical review of the adequacy of existing schools of thought. More specifically, we try to classify all potential sources' of competitive advantage into certain groups, where each group consists of the sources that have mutually high correlation coefficients and at the same time low correlation coefficients with the sources from other groups.

If we were to find that a certain group consists of sources that are discussed by different schools, we could then, at least from one aspect (i.e. by disregarding the environmental context and methodological background based on which each school was developed) conclude that these schools mutually interweave. After briefly reviewing the relevant theory, the paper mainly involves a presentation of the empirical findings of a study of 225 Slovenian firms . By comparing the empirical evidence with the theoretical findings drawn from the literature, we believe some new insights can be offered to scholars and researchers in the area of competitiveness. …

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