Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89292
Authors: 
Jacobides, Michael G.
Winter, Sidney G.
Kassberger, Stefan M.
Year of Publication: 
2010
Series/Report no.: 
LEM Working Paper Series 2010/22
Abstract: 
This paper shows how idiosyncratic resources can be the basis of sustained profitability and persistent heterogeneity under competitive conditions: Generic inputs purchased in the market become idiosyncratic resources by investments in customization. Analytically, we show how heterogeneous firms co-exist in equilibrium. Computationally, we show that sustainable profits can emerge without monopolistic imperfections. We consider how capability heterogeneity, resource customization cost and ease of expansion interact to drive short-run and sustainable profits. Results illustrate that, in an industry evolution context, sustainable profits may represent a small part of total wealth creation, and that changes in factors shaping a sectors' evolutionary trajectory may be more important than changes in factors that determine profits' ultimate sustainability, thus calling into question the familiar emphasis on sustainable advantage.
Subjects: 
competitive advantage
sustainability
heterogeneity
industry evolution
rent appropriation
Document Type: 
Working Paper

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