Creating and Sustaining Competitive Advantage - The Role of Governance Choice
The paper provides a general framework for examining how governance choice affects competitive advantage. I argue that firms rely on assets for competing, and that these assets can be accessed by different governance structures (i.e., they can be in- or outsourced). The transaction cost economics framework is used to expose strengths and weaknesses of governance structures with respect to creating and sustaining competitive advantage. The result is a tradeoff to consider when choosing how to access an asset. A number of implications are forwarded, and the usefulness of the framework is demonstrated by means of an application to the famous General Motors - Fisher Body case. This points to the potential of using transaction cost economics in the analysis of competitive strategy, as well as to the shortcomings of the existing transaction cost economics framework in explaining governance choice. The framework also represents a way to integrate transaction cost economics with the resource-based view and industrial organization.1
Jakob Lage Hansen
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