Sustained competitive advantage in small firm virtual organisations

This paper examines the factors that affect the sustained competitive advantage of small firm virtual organisations. Virtual organisations are separate firms that for certain activities (transactions) behave as if they were a single firm. A sustained competitive advantage occurs when a strategy is implemented that increases firm value but is not capable of duplication by other firms. The extent of the sustained competitive advantage is illustrated by the longevity of the virtual organisation and benefits derived from the virtual organisation by its members. The virtual organisation is formed to provide the firms within the virtual organisation access to additional resources. The extent of the sustained competitive advantage is related to the characteristics of the resources controlled by the virtual organisation. These characteristics, based on transaction cost economics and the resource-based view of the firm, are value, specificity, rareness, inimitability and non-substitutability. These attributes form the basis for the model of virtual organisation sustained competitive advantage developed in this paper. Because virtual organisations consist of a number of individual firms, electronic commerce technologies are necessary to enable inter-organisational co-ordination and to efficiently conduct transactions between firms within the virtual organisation. Electronic commerce technology diffusion and infusion are hypothesised to also affect the sustained competitive advantage of virtual organisations. The hypotheses will be tested using a case-study approach with firms from south-east Queensland providing the sample.