Competitive advantage: creating and sustaining superior performance
01 Jan 1998-
TL;DR: Porter's concept of the value chain disaggregates a company into "activities", or the discrete functions or processes that represent the elemental building blocks of competitive advantage as discussed by the authors, has become an essential part of international business thinking, taking strategy from broad vision to an internally consistent configuration of activities.
Abstract: COMPETITIVE ADVANTAGE introduces a whole new way of understanding what a firm does. Porter's groundbreaking concept of the value chain disaggregates a company into 'activities', or the discrete functions or processes that represent the elemental building blocks of competitive advantage. Now an essential part of international business thinking, COMPETITIVE ADVANTAGE takes strategy from broad vision to an internally consistent configuration of activities. Its powerful framework provides the tools to understand the drivers of cost and a company's relative cost position. Porter's value chain enables managers to isolate the underlying sources of buyer value that will command a premium price, and the reasons why one product or service substitutes for another. He shows how competitive advantage lies not only in activities themselves but in the way activities relate to each other, to supplier activities, and to customer activities. That the phrases 'competitive advantage' and 'sustainable competitive advantage' have become commonplace is testimony to the power of Porter's ideas. COMPETITIVE ADVANTAGE has guided countless companies, business school students, and scholars in understanding the roots of competition. Porter's work captures the extraordinary complexity of competition in a way that makes strategy both concrete and actionable.
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TL;DR: In this article, the authors argue that the trade-off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress, and that instead of simply adding to cost, properly crafted environmental standards can trigger innovation offsets, allowing companies to improve their resource productivity.
Abstract: Accepting a fixed trade-off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress. Studies finding high environmental compliance costs have traditionally focused on static cost impacts, ignoring any offsetting productivity benefits from innovation. They typically overestimated compliance costs, neglected innovation offsets, and disregarded the affected industry's initial competitiveness. Rather than simply adding to cost, properly crafted environmental standards can trigger innovation offsets, allowing companies to improve their resource productivity. Shifting the debate from pollution control to pollution prevention was a step forward. It is now necessary to make the next step and focus on resource productivity.
8,154 citations
Cites background from "Competitive advantage: creating and..."
...For regulators, this poses a question of where to impose regulations in the chain of production from raw materials, equipment, the producer of the end product, to the consumer (Porter, 1985)....
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TL;DR: In this article, the authors examined the linkages between systems of high performance work practices and firm performance and found that these practices have an economically and statistically significant impact on both intermediate outcomes (turnover and productivity) and short and long-term measures of corporate financial performance.
Abstract: This paper comprehensively examined the linkages between systems of High Performance Work Practices and firm performance. Results based on a national sample of nearly one thousand firms indicate that these practices have an economically and statistically significant impact on both intermediate outcomes (turnover and productivity) and short- and long-term measures of corporate financial performance. Support for the predictions that the impact of High Performance Work Practices is in part contingent on their interrelationships and links with competitive strategy was limited.
8,131 citations
Cites background from "Competitive advantage: creating and..."
...Porter (1985) provided the dominant typology of competitive strategies in the business policy literature; the types specified are cost leadership, differentiation, and focus....
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...…management practices can help to create a source of sustained competitive advantage, especially when they are aligned with a firm’s competitive strategy (Begin, 1991; Butler, Ferris, & Napier, 1991; Cappelli& Singh, 1992; Jackson& Schuler, 1995; Porter, 1985; Schuler, 1992; Wright & McMahan, 1992)....
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...This literature, although largely conceptual, concludes that human resource management practices can help to create a source of sustained competitive advantage, especially when they are aligned with a firm’s competitive strategy (Begin, 1991; Butler, Ferris, & Napier, 1991; Cappelli& Singh, 1992; Jackson& Schuler, 1995; Porter, 1985; Schuler, 1992; Wright & McMahan, 1992)....
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TL;DR: In this article, the authors analyze the internal stickiness of knowledge transfer and test the resulting model using canonical correlation analysis of a data set consisting of 271 observations of 122 best-practice transfers in eight companies.
Abstract: The ability to transfer best practices internally is critical to a firtn's ability to build competitive advantage through the appropriation of rents from scarce internal knowledge. Just as a firm's distinctive competencies tnight be dificult for other firms to imitate, its best prczctices could be dfficult to imitate internnlly. Yet, little systematic attention has been pcrid to such internal stickiness. The author analyzes itlterrzal stickiness of knowledge transfer crnd tests the resulting model using canonical correlation analysis of a data set consisting of 271 observations of 122 best-practice transfers in eight companies. Contrary to corzverztiorzrzl wisdom that blames primarily motivational factors, the study findings show the major barriers to internal knowledge transfer to be knowledge-related factors such as the recipient's lack oj absorptive capacity, causal anzbiguity, and an arciuous relationship between the source and the recipient. The identification and transfer of best practices cally are hindered less by confidentiality and legal is emerging as one of the most important and obstacles than external transfers, they could be widespread practical management issues of the faster and initially less complicated, all other latter half of the 1990s. Armed with meaningful, things being equal. For those reasons, in an era detailed performance data, firms that use fact- when continuous organizational learning and based management methods such as TQM, bench- relentless performance improvement are needed to marking, and process reengineering can regularly remain competitive, companies must increasingly compare the performance of their units along resort to the internal transfer of capabilitie~.~ operational dimensions. Sparse but unequivocal Yet, experience shows that transferring capaevidence suggests that such comparisons often bilities within a firm is far from easy. General reveal surprising performance differences between Motors had great difficulty in transferring manuunits, indicating a need to improve knowledge facturing practices between divisions (Kerwin and utilization within the firm (e.g., Chew, Bresnahan, Woodruff, 1992: 74) and IBM had limited suc
6,805 citations
TL;DR: In this article, the authors investigate the patterns of technological evolution and their impact on environmental conditions and find that technological change within a product class will be characterized by long periods of incremental change punctuated by discontinuities, and the locus of innovation will differ for competence destroying and competence-enhancing technological changes.
Abstract: Investigates the patterns of technological evolution and their impact on environmental conditions. Seven hypotheses are offered in order to demonstrate that technology is a central force in shaping the environments within which organizations operate. These hypotheses are: (1) technological change within a product class will be characterized by long periods of incremental change punctuated by discontinuities; (1a) technological discontinuities are either competence enhancing (build on existing skills and know-how) or competence destroying (require fundamentally new skills and competences); (2) the locus of innovation will differ for competence destroying and competence-enhancing technological changes. Competence-destroying discontinuities will be initiated by new entrants, while competence-enhancing discontinuities will be initiated by existing firms; (3) competitive uncertainty will be higher after a technological discontinuity than before discontinuity; (4) environmental munificence (i.e., resource availability and support for growth) will be higher after a technological discontinuity than before the discontinuity; (5) competence-enhancing discontinuities will be associated with decreased entry-to-exit ratios and decreased interfirm sales variability (thus strengthening product leaders and increasing barriers to entry). These patterns will be reversed for competence-destroying discontinuities; (6) successive competence-enhancing discontinuities will be associated with smaller increases in uncertainty and munificence; and (7) those organizations that initiate major technological innovations will have higher growth rates than other firms in the product class. Data were collected from U.S. firms in three product classes, domestic scheduled passenger airline transport, Portland cement manufacture, and minicomputer manufacture, from the year of the niche market's inception through 1980. Results indicate that after the three niche openings, there were six competence-enhancing technological discontinuities and two competence-destroying discontinuities in total. Each of these discontinuities had a far greater impact on a key measure of cost or performance than more incremental technological events. In addition, except for the period following the introduction of semiconductor memory in minicomputers, the ability of experienced industry observers to predict demand following technological disruptions was far worse than prior to the disruption. Demand growth following the discontinuity was significantly higher than it was immediately prior to the discontinuity, which had an enormous impact on product-class demand. Also, the ratio of entries to exits was higher in each of the five years before a competence-enhancing discontinuity than during the five subsequent years, though none of the differences is statistically significant. Though market variability in sales growth was expected, it was found that some firms' sales grew explosively while other firms experienced sales declines. It is also suggested that as technology matures, successive competence-enhancing discontinuities increase both uncertainty and munificence, but not as much as those discontinuities that preceded them in establishing the product class. Finally, early adopters of technology were found to experience more growth than other firms. Using three different product types, with a wide range of years from inception, it is shown that technology does evolve through long periods of incremental change punctuated by relatively rare innovations that radically improve the state of the art. Although these incidences of change are rare, they stand out clearly and have significantly altered competitive environments. (SFL)
5,839 citations
Cites background from "Competitive advantage: creating and..."
...The benefits of volume and experience provide early movers with a competitive edge not easily erased (Porter, 1985; MacMillan and McCaffrey, 1984)....
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TL;DR: Using a large-scale sample of industrial firms, this paper links search strategy to innovative performance, finding that searching widely and deeply is curvilinearly (taking an inverted U-shape) related to performance.
Abstract: A central part of the innovation process concerns the way firms go about organizing search for new ideas that have commercial potential. New models of innovation have suggested that many innovative firms have changed the way they search for new ideas, adopting open search strategies that involve the use of a wide range of external actors and sources to help them achieve and sustain innovation. Using a large-scale sample of industrial firms, this paper links search strategy to innovative performance, finding that searching widely and deeply is curvilinearly (taking an inverted U-shape) related to performance. Copyright © 2005 John Wiley & Sons, Ltd.
5,167 citations
Cites background from "Competitive advantage: creating and..."
...The focus on openness and interaction in studies of innovation reflects a wider trend in studies of firm behavior that suggest that the network of relationships between the firm and its external environment can play an important role in shaping performance. For instance, Shan et al. (1994) find an association between cooperation and innovative output in biotechnology start-up firms....
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...1 However, a very similar variable to that of the variable measuring search breadth has been used by Laursen & Salter (2003) as a predictor of the propensity of firms to use knowledge developed at universities....
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...Some firms suffer from the problems highlighted by Koput (1997), extending themselves too far in efforts to...
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References
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TL;DR: In this paper, the authors tried to understand the strategy making process by examining the organizational and environmental context in which it occurs by looking for simultaneous associations among a fairly large number of variables It was hoped that these variables would configure into models or archetypes which describe a series of different, though very frequently occurring modes or organizational failure and success.
Abstract: There have been few attempts to understand the strategy making process by examining the organizational and environmental context in which it occurs Rather than adopting the stance of contingency theorists who focus mainly on bivariate relationships, we decided to look for simultaneous associations among a fairly large number of variables It was hoped that these variables would configure into models or archetypes which describe a series of different, though very frequently occurring modes or organizational failure and success The methodology used to isolate archetypes is explained Ten archetypes are described Successful archetypes are: the adaptive firm under moderate challenge, the adaptive firm in a very challenging environment, the dominant firm, the giant under fire, the entrepreneurial conglomerate, and the innovator Failure archetypes include: the impulsive firm, the stagnant bureaucracy, the headless giant, and the aftermath
1,229 citations