Strategic Factor Markets Scale Free Resources and Economic Performance: The Impact of Product Market Rivalry

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    Abstract

    This paper analyzes how scale free resources, which can be acquired by multiple firms simultaneously and deployed against one another in product market competition, will be priced in strategic factor markets, and what the consequences are for the acquiring firms' performance. Based on a game-theoretic model, it shows how the impact of strategic factor markets on economic profits is influenced by product market rivalry, preexisting competitive (dis)advantages, and the interaction of acquired resources with those preexisting asymmetries. New insights include the result that resource suppliers will aim at (and largely succeed in) setting resource prices so that the acquiring firms earn negative strategic factor market profits—sacrificing some of their preexisting market power rents—by acquiring resources that they know to be overpriced.
    Original languageEnglish
    JournalStrategic Management Journal
    Volume36
    Issue number12
    Pages (from-to)1826-1844
    Number of pages19
    ISSN0143-2095
    DOIs
    Publication statusPublished - 2015

    Keywords

    • Resourcebased view
    • Strategic factor markets
    • Competitive advantage
    • Rivalry
    • Game theory
    • Scale free resources

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