The Competitive Advantage Period and the Industry Advantage Period: Assessing the Sustainability and Determinants of Superior Economic Performance

185 Pages·2009·0.66 MB·English

by  Thomas Fritz (auth.)

Thomas Fritz
The Competitive Advantage Period and the
Industry Advantage Period
GABLER EDITION WISSENSCHAFT
Thomas Fritz
The Competitive Advantage
Period and the Industry
Advantage Period
Assessing the Sustainability
and Determinants
of Superior Economic Performance
With a foreword by Prof. Dr. Andreas Bausch
GABLER EDITION WISSENSCHAFT
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The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie;
detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.
Dissertation Jacobs University Bremen, 2008
1stEdition 2008
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Foreword
One of the major goals in strategic management research is to identify firm-related and indus-
try-related sources and determinants of profitability differences among firms. Accordingly,
essential theoretical views explaining superior economic performance of firms include (1)
competitive advantages realized by firms compared to their rivals and (2) industry structural
characteristics. Both became prominent in strategic management research by the seminal
work of Michael Porter who originally distinguished two corresponding performance effects,
the positioning effect and the industry effect. Many empirical studies have already been con-
ducted on these issues. The majority considered market entry barriers and industry concentra-
tion (as external factors), competitive strategies and resources/ capabilities (as internal fac-
tors) and strategic group membership (as an intermediate factor).
From a strategic and long-term perspective, the sustainability of superior economic perform-
ance is of particular interest. Considerably less empirical studies have been conducted with
respect to this topic. And there is no empirical study to date existing that has quantified for
different industries the time span over which firms had been able to attain superior economic
performance. Thomas Fritz bridges this research gap with his PhD thesis by determining the
competitive advantage period (CAP) and the industry advantage period (IAP). He gives in-
sights concerning the sustainability of performance differences at both the intra-industry and
inter-industry level.
Thomas Fritz significantly contributes with his thesis to a holistic understanding of the drivers
influencing the sustainability of superior economic performance. All empirical studies are
based on sound theoretical analyses and argumentations. Thomas Fritz starts his research en-
deavor with a comprehensive narrative and meta-analytic review of past empirical research on
the creation of superior economic performance. He then conducts his empirical studies for a
broad sample covering more than 6,000 firms located in the G7 countries during the years
1980 to 2005 to calculate the CAP, the IAP, and their determinants.
The conclusions the author draws add perceptibly to the existing body of knowledge in the
research field of business and corporate strategy. In addition, the results offer a well founded
and sound guidance for practitioners searching for explanations of sustainable superior eco-
nomic performance.
Prof. Dr. Andreas Bausch
V
Preface
Completing a PhD is truly a marathon event, and I would not have been able to complete this
journey without the aid and support of several people. Although a few words do not do justice
to their contribution I would like to thank the following people for making this work possible.
First of all, I would like to thank Prof. Dr. Andreas Bausch for being a great supervisor. His
ideas and tremendous support had a major influence on this thesis. Additionally, I would like
to thank him for giving me the chance to work at his professorship and to enable me to visit
several international conferences. I have learned a lot during this time and I am convinced that
this knowledge will help me in the future.
I would like to thank Prof. Dr. Gert Brunekreeft and Prof. Dr. Peter-J. Jost for reviewing my
thesis. I am extremely glad to have had such supportive co-supervisors. I enjoyed their inter-
est in my research as well as the fruitful discussions.
My thanks to my friends and colleagues for the great time I had in our research group. I en-
joyed the atmosphere, their friendship, and their support. My thanks to Antje Beier, Kathrin
Bösecke, Anne Galander, Christian Grube, Kristine Hermann, Michael Hunoldt, Mario Krist,
Frithjof Pils, Nina Rosenbusch, Tonia Ruppenthal, Gerlinde Steinborn, Duc Linh Van Tri,
and Tobias Waskönig for the great collaboration over the years. It was a pleasure to work
with all these people and to benefit from their knowledge. Especially, I would like to thank
Christian Grube for the productive discussions and exchange of ideas. Furthermore, special
thanks to Duc Linh Van Tri for being such an excellent co-worker and team player. I would
also like to thank all the rest of the academic and administrative staff of Jacobs University.
Last but not least, I wish to thank my family who has supported me at all times, particularly
my Mum and Dad who are always available for me, my brother, Michael, for his support in
hard- and software questions, and, most important of all, my wife, Christina, who not only
nearly never complained about all the weekends I spent with my laptop but also cheered me
up all the time although she had to cope with all the moods I went through while writing my
PhD thesis.
Thomas Fritz

VII
Table of Contents
Foreword ....................................................................................................................V
Preface ..................................................................................................................VII
Table of Contents .......................................................................................................IX
Table of Figures .........................................................................................................XI
List of Abbreviations ................................................................................................XV

Part One: Introduction ...........................................................................................1
1 Research Objectives ..........................................................................1
2 Research Design ................................................................................4
3 Structure of the Thesis .......................................................................6

Part Two: Past Empirical Research on the Creation of Superior Economic
Performance – A Narrative and Meta-Analytic Review of
Industry- and Firm-level Influences ....................................................9
1 Introduction .......................................................................................9
2 Theoretical Background and Propositions ......................................10
3 Method ............................................................................................23
4 Sample .............................................................................................26
5 Past Empirical Research ..................................................................31
6 Conclusion .......................................................................................61
IX
Part Three: The Concept and Empirical Measurement of the Competitive
Advantage Period and the Industry Advantage Period –
A Kolmogorov-Smirnov Approach ....................................................67
1 Introduction .....................................................................................67
2 The Concept of the Competitive Advantage Period (CAP) and the
Industry Advantage Period (IAP) ....................................................69
3 Method ............................................................................................75
4 Sample .............................................................................................80
5 Results and Discussion ....................................................................82
6 Conclusion .......................................................................................96

Part Four: Determinants of the Competitive Advantage Period and the
Industry Advantage Period – Analyzing Intra- and Inter-
Industry Performance Influences ......................................................99
1 Introduction .....................................................................................99
2 Theoretical Background and Hypotheses ......................................100
3 Method ..........................................................................................108
4 Results and Discussion ..................................................................113
5 Conclusion .....................................................................................136

Part Five: Conclusion ..........................................................................................139

Literature .................................................................................................................151

X
Table of Figures
Figure 1: Stages and strategies of research............................................................................6
Figure 2: Main research streams and related/(sub-)concepts on the creation and
sustainability of superior economic performance................................................12
Figure 3: Porter’s generic strategies....................................................................................19
Figure 4: Miles and Snow typology of generic strategies...................................................20
Figure 5: Relationship between traditional “strength, weaknesses, opportunities, threats”
analysis, the resource-based model, and the market-based model.......................22
Figure 6: Past research included in the narrative review.....................................................27
Figure 7: Descriptive characteristics of the sample.............................................................29
Figure 8: Recent reviews about empirical research on the sources of superior economic
performance..........................................................................................................30
Figure 9: Past empirical research on the dynamic development of superior economic
performance..........................................................................................................33
Figure 10: Past empirical research on the influence of industries’ structural
characteristics on superior economic performance..............................................34
Figure 11: Past empirical research on the influence of generic strategies on superior
economic performance.........................................................................................40
Figure 12: Past empirical research on the influence of strategic groups on superior
economic performance.........................................................................................43
Figure 13: Past empirical research on the influence of firm resources and capabilities
on superior economic performance......................................................................46
Figure 14: Meta-analytic integration of the relative influence of industry, firm,
corporate, business-unit, and year effects on performance..................................49
XI
Figure 15: Relative frequency of effects for the concentration-performance relationship
in past empirical research.....................................................................................51
Figure 16: Relative frequency of effects for the entry barrier–performance relationship
in past empirical research.....................................................................................53
Figure 17: Relative frequency of superior performance impact resulting from (a) certain
strategic set-up(s) in past empirical research.......................................................55
Figure 18: Relative frequency of effects for the strategic group–performance relationship
in past empirical research.....................................................................................58
Figure 19: Integrative framework on the determinants of superior economic performance.63
Figure 20: Rise and fall of competitive advantages and competitive disadvantages.............74
Figure 21: Illustration of the Kolmogorov-Smirnov (K-S) test.............................................79
Figure 22: Procedure applied for calculating the competitive advantage period (CAP)
and the industry advantage period (IAP)..............................................................80
Figure 23: Size and country of origin of firms analyzed.......................................................81
Figure 24: Industry advantage period (IAP) and industry disadvantage period (IDAP).......82
Figure 25: Competitive advantage period (CAP) and competitive disadvantage period
(CDAP).................................................................................................................83
Figure 26: Industries with an industry advantage period (IAP) based on ROA of 10 or
more years............................................................................................................88
Figure 27: Industries with an industry advantage period (IAP) based on Tobin’s q of 10
or more years........................................................................................................88
Figure 28: Firms with a competitive advantage period (CAP) based on ROA of 20 or more
years.....................................................................................................................89
XII