The search for sustainable competitive advantage

372 Pages·2010·1.76 MB·English

by  Wu, Minyu

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The search for sustainable competitive advantage:
A stakeholder management perspective

A thesis presented in partial fulfillment of the requirements for the degree
of
Doctor of Philosophy
in
Management
at Massey University, Albany
New Zealand

Minyu Wu

2010
Abstract
Competitive advantage and stakeholder management are two important research
streams that have attracted much attention during the past two decades. Although
competitive advantage is the core issue of strategic management in which stakeholder
management is rooted, the two topics have developed seemingly independently in the
literature.
The main purpose of this thesis is to explore how stakeholder management
influences competitive advantage. The research is guided by a theoretical framework
that employs a stakeholder perspective, linking three perspectives of competitive
advantage—the resource-based view, the relational view, and the activity-position
view. The general research approach chosen is a qualitative, multiple-case study. Ten
cases were selected, from leading firms of several industries in Taiwan, and in-depth
interviews were conducted.
Results showed that a firm’s competitive advantage comes from its resource
capacity (superior resources, unique capabilities, and solid relationships) and a mix of
activities that respond to the competitive context. Competitive advantage, too, can be
analysed in terms of two components: resource advantage and positional advantage.
Stakeholder management can have significant influences on resource advantages as
stakeholders play important roles in the process of value creation. They are the
providers who supply valued resources to the firm and, as such, can act as catalysts or
hindrances that either facilitate or impede the generation of valued resources.
Successful stakeholder management strengthens a firm’s resource profile and thus
enhances its resource advantages. Stakeholder management also has considerable
influences on positional advantages, as stakeholders are relevant to activities and
drivers that determine cost and differentiation. Moreover, stakeholders are key players
in the competitive context, who help to shape the competitiveness of the firm.
The study reported that stakeholder management helps to sustain competitive
advantage through advancing a firm’s resource capacity—resource commitment,
developing capabilities, and building relationships. Stakeholder management also
generates several isolating mechanisms that preserve competitive advantage,
including time compression diseconomies, causal ambiguity, social complexity, and
transaction costs. However, in the face of ever-changing situations, managers need to
adopt different strategies for managing stakeholder relations. To achieve sustained
competitive advantage in a dynamic context, firms not only have to strengthen the
capacity of resource advantage to fit the competitive strategy, but also need to use
innovative and entrepreneurial approaches for managing their stakeholder relations.

i
Acknowledgements
First, I owe particular gratitude to my supervisor, Dr. Gabriel Eweje, for his
invaluable supervision of this thesis. He has mentored and guided me for the past four
years and cultivated my capabilities of research and teaching at the same time. He
gave me many insightful and constructive comments along my research journey. It is
always a pleasure to work with Gabriel and I appreciate his remarkable help very
much.
I also want to acknowledge my co-supervisor, Professor Tim Bentley, for his
time and efforts in support, encouragement and priceless comments. He is a
knowledgeable and considerate person. I am deeply indebted to him for his great help.
In addition, I would like to thank all the interviewees who spared their time from
their tight schedules to participate in this research. Without their help, it would have
been impossible for me to complete this study.
Finally, I would like to thank my fantastic wife and my two children for being in
support of me all the time. I am so glad I have finished this thesis and I would like to
dedicate it to them.
ii
Table of Contents

Abstract iii
Acknowledgement iii
Table of contents iii
Chapter 1: Introduction 001
1.1 Background 001
1.2 Motivation for this study 005
1.3 Justification for the study 006
1.4 Research focus 013
1.5 Key concepts 015
1.6 Research objective, goals and questions 018
1.7 Organisation of the study 020

Chapter 2: Literature review 023
2.1 Introduction 023
2.2 Competitive advantage 023
2.2.1 The concept of competitive advantage 024
2.2.2 Perspectives of competitive advantage 028
2.2.3 Common issues related to competitive advantage 047
2.3 Stakeholder management 050
2.3.1 The concept of stakeholders 051
2.3.2 Perspectives of stakeholder theory 054
2.3.3 Stakeholder management and strategy 066
2.4 Linkage between stakeholder management and competitive advantage 071
2.5 Conclusion 075

Chapter 3: Theoretical framework and methodology 076
3.1 Introduction 076
3.2 Theoretical framework 076
3.3 Approach of the research 088
3.4 Case selection and recruitment 092
3.5 Data collection 098
3.5.1 Semi-structured interviews 098
3.5.2 Documentary data 099
3.6 Data analysis 100
3.7 Reliability and validity 103

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Table of Contents

3.8 Ethical considerations 106
3.9 Summary of case companies 107
3.10 Conclusion 124

Chapter 4: Integrating different perspectives of competitive advantage 126
4.1 Introduction 126
4.2 Resource advantages 129
4.2.1 Resources acquired from the markets 129
4.2.2 Resources built or accumulated internally 133
4.2.3 Resources acquired or generated through inter-firm partnerships 135
4.2.4 Resources built or generated through other channels 140
4.2.5 Developing a resource profile through numerous sources 142
4.3 Positional advantages 144
4.3.1 The resource portfolios and positional advantages 146
4.3.2 The role of activities and drivers 150
4.3.3 The influences of the competitive context 162
4.3.4 Configuring activities as responses to the competitive context 166
4.4 Towards an integrative approach 168
4.5 Conclusion 171

Chapter 5: Stakeholder management influences on sources of competitive
advantage 173
5.1 Introduction 173
5.2 Stakeholder management influences on resource advantages 175
5.3 Stakeholder management influences on positional advantages 189
5.4 Discussion 199
5.5 Conclusion 204

Chapter 6: Sustaining competitive advantage through stakeholder
management 206
6.1 Introduction 206
6.2 The dynamic perspective of the firm and activities related to sustained
competitive advantage 210
6.2.1 Resource commitments 210
6.2.2 Developing capabilities 221
6.2.3 Building relationships 230
6.2.4 A comprehensive version of the dynamic perspective of the firm 238
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Table of Contents

6.3 Isolating mechanisms created by stakeholder management 241
6.3.1 Time compression diseconomies 241
6.3.2 Causal ambiguity 245
6.3.3 Social complexity 248
6.3.4 Transaction costs 252
6.3.5 A stakeholder perspective of isolating mechanisms 257
6.4 Conclusion 259

Chapter 7: The manager’s role in developing competitive advantage in a
multiple stakeholder context 261
7.1 Introduction 261
7.2 The concept of balancing different stakeholder demands 264
7.2.1 Dimensions of balancing different stakeholder demands 265
7.2.2 How to balance stakeholder demands 270
7.3 Balancing stakeholder demands and competitive advantage 275
7.3.1 Supporting an effective mix of resources 276
7.3.2 Sustaining competitive advantage 279
7.4 Dynamic stakeholder relations and strategies for managing
stakeholders 282
7.4.1 Developing and maintaining relations with existing stakeholders 284
7.4.2 Creating relations with new stakeholders 289
7.4.3 Sustained competitive advantage and managing new stakeholder
relations 294
7.5 Conclusion 297

Chapter 8: Conclusion, limitation and further research 299
8.1 Introduction 299
8.2 Thesis overview 299
8.3 Research findings 302
8.4 Contribution and implications of this study 307
8.5 Limitations of the study and further research 313

Notes 316
References 319
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Table of Contents

Appendices
Appendix 1: Interview schedule 360
Appendix 2: Case study protocol 361
Appendix 3: Coding list 363

List of Tables
Table 1.1: The research goals of the study 020
Table 2.1: A summary of definitions in the competitive advantage literature 026
Table 3.1: Comparing different perspectives of competitive advantage 084
Table 3.2: Profiles of case companies 097
Table 4.1: Empirical findings: Source of resource advantages 143
Table 4.2: Positional strategies of case companies 147
Table 4.3: Empirical findings: Source of positional advantages 151
Table 5.1: Empirical findings: Stakeholder management and resource
advantages 177
Table 5.2: Empirical findings: Stakeholder management and positional
advantages 191
Table 6.1: Empirical findings: Stakeholder management and advancing
resource capacity 212
Table 6.2: Empirical findings: Stakeholder management and isolating
mechanisms 242

List of Figures
Figure 3.1: An analytical theoretical framework 077
Figure 7.1: The concept of balancing stakeholder demands 272
Figure 7.2: A framework of managing dynamic stakeholder relations 284

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Chapter 1: Introduction
1.1 Background
This thesis examines the linkage between competitive advantage and stakeholder
management. Competitive advantage is a very popular topic in the literature. For
example, from a search of Google Scholar using the keywords ‘competitive
advantage’, approximately 595,000 results are produced. If the search is limited in
scope to keywords in the title of the article, then 7,240 results still result.1 Among the
large number of studies on this theme, there are distinctive research streams based on
different units of analysis which thus display various emphases. Three main
approaches can be used to illustrate their major differences.
Firstly, the activity-position view2 argues that the firm’s superior performance
mostly results from its strategic choice that provides the firm a better positioning in
the industry structure (Porter, 1980; 1985; 1991; 1996; Ghemawat & Rivkin, 2001).
Porter (1980) argues that the strategic choice is determined by a range of competitive
forces: (1) the bargaining power of customers, (2) the bargaining power of suppliers,
(3) the intensity of rivalry amongst firms in the industry, (4) the threat of substitute
products, and (5) the threat of new entrants into the industry. Thus, in this view,
competitive advantage is achieved by fitting the role that can meet the
industry-specific position. In particular, Porter (1996) emphasises that competitive
advantage resides in business activities and activity systems, rather than firm
resources.

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Chapter 1: Introduction

Secondly, the resource-based view holds that dissimilar resource endowments
result in distinctive competitive advantage and different performances between firms
(e.g., Barney, 1991; Wernerfelt, 1984; Peteraf & Barney, 2003). According to this
view, the primary resources regarding a firm’s competitive advantage include its
physical assets, financial capital, human resources, organisational systems, technology
and knowledge, and intangible assets (e.g., trademark, patent, copyright, and
goodwill). In particular, Barney (1991) indicates that a firm’s sustained competitive
advantage results from its strategic resources that are valuable, rare, imperfectly
imitable, and non- substitutable. This view focuses on a firm’s internal attributes,
especially its strategic resources (Peteraf & Barney, 2003).
Thirdly, the relational view, which goes beyond the firm’s boundaries, suggests
that competitive advantage stems from collaboration or social relations between firms,
rather than a firm’s distinctive resources or individual activities (Dyer & Singh, 1998;
Lavie, 2006). Dyer and Singh suggest four potential sources of inter-organisational
competitive advantage: (1) relation-specific assets, (2) knowledge-sharing routines, (3)
complementary resources/capabilities, and (4) effective governance. In this view, a
firm’s critical capabilities are not individual skills or tacit knowledge, for example,
within the firm but relational resources or capabilities generated through social
relationships between organisations. Accordingly, an individual firm acting alone is
not able to generate competitive advantage, which is determined by the dynamic
interactions between organisations to create mutual benefit.
There are two important issues regarding competitive advantage in the extant
literature. First, the different approaches are based on distinctive assumptions and
units of analysis, and each of them focuses on and explains only part of the story. In
2