This Article Full Text (PDF) e-companion References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via HighWire Citing Articles via Google Scholar Google Scholar Articles by Pacheco-de-Almeida, G. Articles by Zemsky, P. Search for Related Content

The Timing of Resource Development and Sustainable Competitive Advantage

Leonard N. Stern School of Business, New York University, 44 West Fourth Street, New York, New York 10012
INSEAD, Boulevard de Constance, 77305 Fontainebleau Cedex, France
gpacheco{at}stern.nyu.edu
peter.zemsky{at}insead.edu

We develop a formal model of the timing of resource development by competing firms. Our aim is to deepen and extend resource-level theorizing about sustainable competitive advantage. Our analysis formalizes the notion of barriers to imitation, particularly those based on time compression diseconomies where the faster a firm develops a resource, the greater the cost. Time compression diseconomies are derived from a micromodel of resource development with diminishing returns to effort. We use a continuous time model of the flows of development costs and market revenues, which allows us to integrate strategic and financial analyses of firm investment problems.

We examine two dimensions of sustainability: whether the resources underlying a firm’s competitive advantage are economically imitable and, if so, how long imitation takes. Surprisingly, we show that sustainable competitive advantage does not necessarily lead to superior performance. We find that imitators sometimes benefit from reductions in their absorptive capacity and that innovators should license either all or none of their knowledge. Despite recent criticisms, we reaffirm the usefulness of a resource level of analysis for strategy research, especially when the focus is on resources developed through internal projects with identifiable stopping times.

Key Words: project management; barriers to imitation; formal foundations of strategy; time-based competition; knowledge spillovers
History: Received: February 15, 2006;

This article has been cited by other articles:

				E. Dechenaux, B. Goldfarb, S. Shane, and M. Thursby Appropriability and Commercialization: Evidence from MIT Inventions Management Science, May 1, 2008; 54(5): 893 - 906. [Abstract] [PDF]