Knowledge Power

Competitive Advantage

It is difficult to find an organization that is not interested in competitive advantage in today’s dynamic, global, highly competitive environment (Matusik & Hill, 1998; Chaharbaghi & Lynch, 1999; Barney, 2002; Fahey, 2002; Teece, 2009). Organizational strategists have long discussed competitive advantage (esp. in economic terms such as earning superior rents, gaining larger market share, raising barriers to market entry, locking out competitors, and locking in customers; see Barney, 1986), but the comparatively recent advent and continuing proliferation of social media applications (e.g., social networking such as via Facebook, microblogging such as Twitter, collaborative projects such as Wikis; see Kaplan & Haenlein, 2010) is changing the nature of competition (Nissen & Bergin, 2013). Nonetheless, numerous empirical studies assess (Castillo, 2003) and provide evidence (Darroch, 2005; Marques & Simon, 2006; Bogner & Bansal, 2007; Holsapple & Jones, 2007; Zack et al., 2009; Holsapple & Wu, 2011; Jayasingam et al., 2012; Nold, 2012) that competitive advantage stems from the intellectual and other assets that an organization is able to appropriate¹ (i.e., assert ownership and control over), in addition to how such assets are used (Holsapple & Singh, 2001) and the process capabilities that it is able to employ dynamically (Teece et al., 1997). The latter part of this point is key: if an organization bases its competitive advantage on some assets that can be obtained readily through the market or other means of imitation, then there is little to prevent competitors from matching its actions and performance (Dierickx & Cool, 1989). Hence any competitive advantage effected by the lead firm is destined to be ephemeral at best.

This is the case especially for information technology (Nissen, 2006). For a period of time in the Seventies, for instance, a few banks offering automated teller machines (ATMs) to customers enjoyed some competitive advantages over those without this technology, but today nearly every bank offers ATMs. Instead of conferring some competitive advantage, now ATM technology represents just another cost of doing business in banking. Computerized reservation systems (CRSs), as another instance, similarly conferred some competitive advantage to the pioneering airlines behind their development and initial deployment in the Eighties, but today nearly every airline uses CRSs. Instead of conferring some competitive advantage, now CRS technology represents just another cost of doing business in air travel. Leading-edge financial investment firms, as a third instance, gained some competitive advantage in the Nineties through computer trading systems for securities such as stocks, bonds and futures, but today nearly every financial investment firm trades securities as such. Instead of conferring some competitive advantage, now this information technology represents just another cost of doing business in securities financial investment. The list of similar instances goes on and continues through cloud computing, mobile applications, tablets, social media and like trends that are current at the time of this writing.