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Why are firms different: resource endowment or deliberate differentiation? (RV of 2000/85/MKT)

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Of fundamental interest is how organizational differences arise. This paper shows that the information acquisition strategies of competing firms can be a source of firm differences and thus competitive advantage even with homogeneous organizational capabilities and resources. This can occur when firms have limited capacity to acquire all available information and must thus select between very accurate information about only a limited number of uncertain market factors (depth of information) and information about all factors but only of limited accuracy (breadth of information). The authors show that neither the presence of core competencies nor increasing marginal returns to information processing capacity are required for a focused information acquisition strategy that favors depth of information to be an equilibrium. Instead, all that is needed is Bayesian learning. In this way they show that firm differences in a critical resource (i.e., knowledge) and core competency (i.e., learning) can arise endogenously from otherwise homogenous firms as the result of profit-maximizing behavior.

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp2004/2004-39.pdf

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Copyright INSEAD. All rights reserved