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Key words: resource valuation; strategic factor markets; imputation; arbitrage; serendipity; resource-based view
As emphasized by Barney (1986), any explanation of superior profitability must account for why the resources supporting such profitability could have been acquired for a price below their rent-generating capacity. Building upon the literature in economics on coordination failures and incomplete markets, we suggest a framework for analyzing such strategic factor market inefficiencies. Our point of departure is that a strategic opportunity exists whenever prices fail to reflect the value of a resource's best use. This paper examines the challenges of imputing a resource's value in the absence of explicit price guidance and suggests the likely characteristics of strategic opportunities. Our framework also suggests that the discovery of strategic opportunity is often a matter of 'serendipity' and access to relevant idiosyncratic resources. This latter observation provides prescriptive advice, although the analysis also explains why more detailed guidance has to be firm specific. Copyright (C) 2003 John Wiley &Sons, Ltd.
INTRODUCTION
Given that firms are distinguished by the resources they command, and that those resources must in some ultimate sense have been acquired through purchase, how could it happen that the purchase prices are sufficiently favorable to support superior profitability (Barney, 1986)? Barney sets forth what might be called the 'bad news' about resource valuation: in general it is difficult to purchase things for less than they are worth. The interests of both the seller and rivals should stand in the way of such an accomplishment. This paper sets forth the good news about resource valuation: our stance is that 'the good news is that the bad news is wrong'.1 (Or at least, the bad news is valid only within its proper sphere.)
Although Barney did not make explicit reference to the efficient markets hypothesis, his vigorous statement of the bad news for strategy clearly has much in common with the (semi-strong) EMH: unless you have superior (inside) information, your only chance of 'beating the market' is the same chance of having good luck that everybody has. This argument seems to put hurdles in the way of anyone who would presume to offer strategic advice, just as the EMH challenges anyone who presumes to offer stock tips at a positive price. We...