When Competitive Advantage Doesn't Lead to Performance : The Resource-Based View and Stakeholder Bargaining Power

Most theories of competitive advantage seek to explain rent capture at the firm level but ignore which internal stakeholders will appropriate this rent. For example, IO economics focuses on market structure and the resource-based view focuses on unique firm-level capabilities that rivals cannot imitate or acquire. As researchers apply these frameworks, they either: 1) assume rent is captured by shareholders, 2) treat within-firm rent appropriation exogenously, or 3) ignore internal rent appropriation altogether. However, internal rent appropriation determines how much of the rent will be observable in measures of firm performance and is therefore central to empirical research focused on firm performance. What if rent from a competitive advantage is appropriated internally so it cannot be observed in performance measures? The resource-based view was not formulated to examine who will get the rent. Yet, this essay argues that the factors leading to a resource-based advantage also predict who will appropriate rent. Knowledge-based assets are promising as a source of sustainable advantage because firm-specificity, social complexity and causal ambiguity make them hard for rivals to imitate. Accordingly, these strong roles for internal stakeholders may grant them a great deal of bargaining power especially relative to investors who contribute the most fungible of all resources. This article integrates the resource-based view with the bargaining power literature by defining the firm as a nexus of contracts. This lens can help to explain when rent will be generated and, simultaneously, who will appropriate it. In doing so, it provides a more robust theory of firm performance than the resource-based view alone. This lens might also be useful for examining other theories of firm performance