Resource margin accounting: an elucidation and preliminary empirical testing

Purpose – The aim of this paper is to describe “resource margin accounting” (RMA) as a valuation framework in strategic analysis. Design/methodology/approach – The paper defines RMA as an improved framework for valuation in competitive strategy, relative to existing value‐added and cash flow methods. The framework was tested on a sample of 300 US manufacturing companies between 1983 and 1998. Findings – The paper finds that the resource margin approach has greater explanatory power than traditional market‐to‐book valuation measures. Practical implications – The resource margin approach is methodologically and empirically superior to economic value‐added (EVA) and cash flow models of valuation. Originality/value – The paper presents and tests a new valuation method: RMA.