Surrendering control to gain advantage

Author(s)

Oliver Alexy, Joel West, Helge Klapper, Markus Georg Reitzig

Abstract

Research Summary: Strategic openness-firms voluntary forfeiting of control over resources-seemingly challenges the premise of the resource-based view (RBV), which posits that firms should control valuable, rare, and inimitable (VRI) resources. We reconcile this apparent paradox by formalizing whether and when firms-consisting of resource bundles and deriving competitive advantage from exploiting selected VRI resources-may maximize profitability by opening parts of their resource base. As such, our article refines RBV-related thinking while supporting the theory's core tenets. Notably, we illustrate how a common-pool resource can become a source of competitive advantage and how firms may use openness to shape inter-firm competition.

Managerial Summary: Conventional wisdom holds that firms must control scarce and valuable resources to obtain competitive advantage. That being said, over the past decade, many firms-among them Computer Associates, IBM, and Nokia-embarked on open strategies and made parts of their valuable resources available for free. These decisions pose an obvious conundrum, which we solve in our article. We use a mathematical model, grounded in principles of the resource-based view, to show why and under what conditions open strategies will succeed. Firms significantly improve their performance when (a) opening resources reduces their cost base while (b) strongly increasing demand for their still-proprietary resource(s). We also explain how openness can reshape markets by weakening competitors, particularly in highly rivalrous environments.

Organisation(s)

Department of Accounting, Innovation and Strategy

External organisation(s)

Keck Graduate Institute, Technische Universität München, Erasmus University Rotterdam

Journal

Strategic Management Journal

Volume

39

Pages

1704-1727

No. of pages

24

ISSN

0143-2095

DOI

https://doi.org/10.1002/smj.2706

Publication date

11-2017

Peer reviewed

Yes

Austrian Fields of Science 2012

502052 Business administration

Keywords

ASJC Scopus subject areas

Economics, Econometrics and Finance(all), Business and International Management, Strategy and Management

Portal url

https://ucris.univie.ac.at/portal/en/publications/surrendering-control-to-gain-advantage(3aeafb5f-0c38-4be4-87ea-7c69a9a788e5).html