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Competitive advantage: the known unknown concept

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  • Deree - The American College of Greece

Abstract

Purpose – The purpose of this paper is to investigate empirically managers’ awareness regarding the concept of competitive advantage, the most taken-for-granted concept in the field of strategic management. Design/methodology/approach – Managers’ awareness regarding the concept of competitive advantage was explored by applying a cross-sectional, self-administered, e-mail survey. Findings – The results of quantitative and qualitative data analyses provide empirical evidence that senior managers, who are heavily involved in the strategic management process of their firms, seem to confuse the concept of competitive advantage with the concept of sources of competitive advantage, especially those pertaining to resource-based theory. Research limitations/implications – The findings establish the hypothesis that senior managers are not aware of the concept of competitive advantage. At the same time, future researchers are encouraged to continue testing the above hypothesis. Practical implications – The findings as well as the provision of a conceptually clear stipulating definition of competitive advantage from literature could increase practicing managers’ awareness relating to the conceptual nature as well as the latent expressions of competitive advantage. Originality/value – Since little research, to date, has been carried out in order to investigate empirically the awareness of managers regarding competitive advantage, this study fills an important gap in the empirical literature of strategic management.
2015, Management Decision, 53(9): 2004-2016. DOI: 10.1108/MD-05-2015-0185
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Competitive advantage: The known unknown concept
Christos Sigalas
Doctor of Philosophy
University of Piraeus
Department of Business Administration
Correspondence to: Christos Sigalas, email: csigalas@acg.edu
2015, Management Decision, 53(9): 2004-2016. DOI: 10.1108/MD-05-2015-0185
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Abstract
Purpose – The purpose of this paper is to investigate empirically managers’ awareness
regarding the concept of competitive advantage, the most taken-for-granted concept in the
field of strategic management.
Design/methodology/approach Managers’ awareness regarding the concept of competitive
advantage was explored by applying a cross-sectional, self-administered, email survey.
Findings The results of quantitative and qualitative data analyses provide empirical
evidence that senior managers, who are heavily involved in the strategic management process
of their firms, seem to confuse the concept of competitive advantage with the concept of
sources of competitive advantage, especially those pertaining to resource-based theory.
Research limitations/implications The findings establish the hypothesis that senior
managers are not aware of the concept of competitive advantage. At the same time, future
researchers are encouraged to continue testing the above hypothesis.
Practical implications – The findings as well as the provision of a conceptually clear
stipulating definition of competitive advantage from literature could increase practicing
managers’ awareness relating to the conceptual nature as well as the latent expressions of
competitive advantage.
Originality/value Since little research, to date, has been carried out in order to investigate
empirically the awareness of managers regarding competitive advantage, this study fills an
important gap in the empirical literature of strategic management.
Keywords Competitive Advantage, Definition of Competitive Advantage, Concept of
Competitive Advantage, Managers’ Awareness, Management Concept, Email Survey
Paper type Research paper
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Introduction
Competitive advantage has been a cornerstone concept in the field of strategic management
(South, 1981; Baaij et al., 2004) since it explains what accounts for differences in
performance among firms (Zott and Amit, 2008; Ceccagnoli, 2009). The scope of business
strategy, on the other hand, is to define the long-term plan of action a firm may pursue to
achieve its performance goals (Zahra and Covin, 1993). For that reason, competitive
advantage is widely accepted in strategic management courses and textbooks as an essential
concept in business strategy (Barney, 1997; Grant, 1998). However, it has been argued that
competitive advantage is a buzzword that causes confusion to academics, business executives
and consultants (Markides, 2000). The source of this confusion is the fact that both academics
and practicing managers have a tendency to use the term of competitive advantage with
different meaning in different contexts (O’Shannassy, 2008). The reason behind this tendency
could be that there are numerous definitions of competitive advantage, each with sometimes a
different meaning in strategic management literature. Indeed, even though there is a great
number of statements in the literature of competitive advantage, a precise and clear definition
has always been quite elusive (Ma, 2000; Arend, 2003; Rumelt, 2003; O’Shannassy, 2008).
Sigalas and Pekka-Economou (2013), who identify and map the problems that stem from
current conceptualization of competitive advantage by the majority of the literature, call this
phenomenon as the ‘definitional problem of competitive advantage’. Based on the above, it
can be assumed that the managers will not be able to understand and observe competitive
advantages, let alone develop one for their own firm. In response to this possibility, this study
employs a field survey in order to investigate empirically managers’ awareness regarding the
concept of competitive advantage.
Literature review
Competitive advantage is a long-lived and conceptually troubled concept
The concept of competitive advantage has a long history and tradition in the strategy
literature. Ansoff (1965) is the first scholar who attempts to define competitive advantage as
the isolated characteristics or particular properties of individual product markets which give a
firm a strong competitive position. Nevertheless, the watershed event that introduced the
concept of competitive advantage in business strategy was Porter’s book on competitive
advantage (1985). While Porter (1985) provides no explicit definition of competitive
advantage, he states that competitive advantage stems from the firm’s ability to create
superior value for its buyers. Porter (1985) adds that superior value stems from offering lower
prices than competitors for equivalent benefits or providing unique benefits that more than
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offset a higher price. Based on the above, Ansoff’s (1965) definition seems to match the
sources of competitive advantage with the concept of competitive advantage itself. On the
other hand, Porter’s (1985) definition seems to match value and particularly benefits net of
price paid with the concept of competitive advantage (Sigalas and Pekka-Economou, 2013).
Since then, many scholars have engaged into the discussion and research of competitive
advantage. This discussion and research has generated a large volume of scholarly output and
provided abundant definitions and statements regarding competitive advantage. In an attempt
to classify all definitions of competitive advantage by the most important contributors in the
field of strategic management, Sigalas and Pekka-Economou (2013) have identified two
streams concerning competitive advantage’s conceptual demarcation. The first stream defines
competitive advantage in terms of performance, e.g. high relative profitability, above average
returns, benefit-cost gap, superior financial performance, economic profits, positive
differential profits in excess of opportunity costs, and cross-sectional differential in the spread
between product market demand and marginal cost. The second stream defines competitive
advantage in terms of its sources or determinants, e.g. particular properties of individual
product markets, cost leadership, differentiation, locations, technologies, product features, and
a set of idiosyncratic firm resources and capabilities.
However, both streams seem to render the syllogistic reasoning of the Sources of Competitive
Advantage-Competitive Advantage-Superior Performance conceptual framework in a
tautology. The syllogistic reasoning is consisting of the following major premise, minor
premise and conclusion.
Competitive advantage leads to superior performance [Major Premise]
Mobility barriers (Caves and Porter, 1977) and/or market positions (Porter, 1985)
and/or idiosyncratic firm resources and capabilities (Barney, 1991) are sources of, or
lead to, competitive advantage [Minor Premise]
Mobility barriers and/or market positions and/or idiosyncratic firm resources and
capabilities lead to competitive advantage which in turn leads to superior
performance [Conclusion]
If the concept of competitive advantage is defined either in the same way, or in a manner that
it is a subset of superior performance, then the Conclusion of the syllogistic reasoning
becomes as follows: ‘Mobility barriers and/or market positions and/or idiosyncratic firm
resources and capabilities lead to superior performance which in turn leads to superior
performance’. Clearly the second causal path in the conceptual framework is a tautology
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since it is logically true and the support with business data is not required to determine its
empirical content.
On the other hand, if the concept of competitive advantage is defined in terms of its sources
or determinants then the Conclusion of the syllogistic reasoning becomes as follows:
Mobility barriers and/or market positions and/or idiosyncratic firm resources and
capabilities lead to mobility barriers and/or market positions and/or idiosyncratic firm
resources and capabilities which in turn lead to superior performance’. It is obvious that the
first causal path in the Sources of Competitive Advantage-Competitive Advantage-Superior
Performance conceptual framework is also a tautology.
But then again, what is competitive advantage? Is competitive advantage any cause or
determinant of superior performance? In other words, does competitive advantage equate to
the so-called sources of competitive advantage, such as locations, technologies, and product
features (see Powell, 2002)? In addition, is competitive advantage equal to superior
performance, in any form, like above normal returns (see Peteraf, 1993), high relative
profitability (see Thomas, 1986), above average returns (see Schoemaker, 1990), economic
value surplus (see Peteraf and Barney, 2003), and above industry’s average economic profits
(see Besanko et al., 2000)? In addition to above bewilderment, does competitive advantage
mean winning the game, i.e. outperforming all rival firms, or merely maintaining a position in
the game, i.e. being above the industry average (Rumelt, 2003)?
From the above, it should be well acknowledged that not only are there multiple meanings of
competitive advantage and there is no agreement on a single conceptually clear and
unambiguous definition among scholars, but also the prevailing two definitional streams
make the ‘Sources of Competitive Advantage-Competitive Advantage-Superior Performance’
conceptual framework tautological. In addition to the above, in literature there are also fuzzy
and abstract definitions of competitive advantage. For example, South (1981: 15), defined
competitive advantage as the “philosophy of choosing only those competitive arenas where
victories are clearly achievable”.
Are managers aware of the concept of competitive advantage?
In view of the fact that competitive advantage has always suffered from a lack of semantic
content (Ma, 2000; Arend, 2003; Foss and Knudsen, 2003; Rumelt, 2003; O’Shannassy,
2008; Sigalas and Pekka-Economou, 2013), it is doubtful that the practicing managers are
aware of the concept of competitive advantage. In particular, it has not been widely
appreciated by academics and scholars that if they do not conclude into a conceptually robust
definition for competitive advantage, which does not incorporate any latent characteristics of
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the concept of performance and of the sources of competitive advantage, then the managers
will not be able to understand, observe and develop competitive advantage for their firms.
Therefore, one can hardly complain that practicing managers do not understand the concept of
competitive advantage when academics and scholars themselves, incline towards semantic
imprecision.
Currently it seems that managers are walking in darkness regarding their endeavors of finding
and developing competitive advantage. In business strategy-related university courses and
executive seminars, practicing managers are guided to find competitive advantages among
their firms’ idiosyncratic resources and market positions without being instructed exactly
what competitive advantage is. What constitutes competitive advantage is a question rarely
asked and even less frequently answered. However, without any consistent and precise
stipulative definition for competitive advantage, the managers do indeed find abstract
competitive advantages in their firms. This must be what prompted Powell (2001: 885) to
mention that “one might suggest that, if asked and similarly prompted, managers could also
perceive animal shapes in cloud formations or anger in a tree”. Most practitioners are content
to apply Justice Stewart's test, i.e. they know competitive advantage when they see it, or so
they assume (Coyne, 1986).
Defining competitive advantage
Despite the fact that it is extremely difficult to identify a conceptually robust stipulative
definition for competitive advantage in literature, Sigalas et al. (2013) have recently crafted a
stipulative definition that it incorporates all the latent characteristics of the competitive
advantage concept and it completely separates competitive advantage from its sources and
from the concept of superior performance. In particular, Sigalas et al. (2013: 335) mention
that competitive advantage is “the above industry average manifested exploitation of market
opportunities and neutralization of competitive threats”.
Based on Sigalas et al.’s (2013) definition, competitive advantage is an unobservable
construct and therefore inherently complicated (Godfrey and Hill, 1995). Due to its latent
nature, competitive advantage is not so easy to identify. Nevertheless, it must be clear that
competitive advantage is not equivalent to its sources, e.g. the mobility barriers, the market
positions as well as the idiosyncratic firm resources and capabilities. Furthermore,
competitive advantage is not equivalent to superior performance, which according to Amit
and Schoemaker (1993) is the above average financial and operational performance. Contrary
to the dominant theoretical perspectives presented in many academic journals and textbooks,
which define competitive advantage either in terms of performance or in terms of its sources
or determining factors, competitive advantage is conceptually distinct. Therefore, the i)
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sources of competitive advantage, ii) competitive advantage and iii) superior performance are
three distinct and different concepts.
Methodology
Research Design
In order to investigate empirically managers’ awareness regarding the concept of competitive
advantage, this study employed a quantitative empirical research as the research approach.
Furthermore, since primary data from the business environment were required for the
empirical research, field survey was chosen as the research method. The field survey
purposefully included firms across all economic sectors in Greece, turning the field survey
into cross-sectional survey. Following Dillman et al.’s (2009) Tailored Design Method that
encourages the use of modern technology in surveys in order to minimize total survey error,
the cross-sectional survey was carried out using email mode. Lastly, the cross-sectional, email
survey was designed to be administered without the presence of the researcher, making the
survey a self-administered one.
Sample
The population of the cross-sectional, self-administered, email survey is comprised of all
medium-sized and large firms incorporated in Greece. The database of Hellastat was used to
draw the sampling frame, because, pursuant to Loyd’s Register Quality Assurance, it contains
almost all firms with corporate legal form as per Greek commercial law. Applying the size
criterion of 10 million Euros of revenues, i.e. European Union Commission (2003)
recommendation concerning the size thresholds of medium-sized and large enterprises,
Hellastat database resulted to a sampling frame of 2,033 firms.
For the calculation of sample size, Cochran’s (1977) random sampling techniques were used.
Assuming confidence level of 95 percent, margin of error of 5 percent, and iii) population’s
standard deviation of 0.5, as per Bartlett et al.’s (2001) recommendations, the required sample
size is equal to 384 cases. However, since the required sample size of the 384 cases exceeds
the 5 percent of the population, the required sample size corrected for population size, using
Cochran’s (1977) correction formula, is equal to 323 cases. In addition, assuming a response
rate between 14 and 19 percent, a minimum drawn sample size between 1,700 and 2,307
cases should have been used. The lower and upper bound of the range is set from the expected
response rate in surveys that target C-suite officers (see DeTienne and Koberg, 2002; Neck et
al., 2004). Since the estimated minimum drawn sample size of the upper bound was above the
population size, i.e. 2,033 firms, census of the population was carried out instead of random
sample selection.
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Variables
Given that the purpose of this study is to investigate managers awareness regarding the
concept of competitive advantage, two set of variables for measuring competitive advantage
had to be developed. The first variable was managers’ self-reported existence of competitive
advantage. In other words, the respondents indicated whether their respective firm has
competitive advantage or not. The second variable was a perceived measure of competitive
advantage. Specifically, competitive advantage was measured using a subjective scale with
various items, each measuring one of competitive advantage’s latent characteristics. It goes
without saying that the managers did not know that the questions answered, were measuring
competitive advantage’s expressions. Since competitive advantage is a relative term and
therefore requires an exogenous basis for comparison (Ma, 2000; Arend, 2003; Peteraf and
Barney, 2003), the variable for measuring competitive advantage was constructed from the
variable of firm competitiveness. Firm competitiveness was measured using Sigalas et al.’s
(2013) subjective five-point Likert scale. Subsequently, the dichotomous variable of
competitive advantage, which is the above industry average firm competitiveness, was
constructed from the comparison of each firm competitiveness with the average
competiveness of the industry. In particular, the companies that exhibit higher level of
competitiveness than the mean value were assumed to have a competitive advantage. On the
contrary, the companies that exhibit a level of competitiveness equal or lower than the mean
value were assumed as not having a competitive advantage.
Data Collection
The data were derived from the responses to survey items of either Chief Executive Officers,
or Chief Financial Officers, or any other C-suite officers, who are heavily involved in the
strategic management process of their firms. Since all respondents are members of top
management that participate in the strategic management process of their firm, it is assumed
that they are all highly qualified to provide accurate responses to the survey’s questions and
items. All respondents that participated in the survey, were assured of confidentiality. The
questionnaire, which is the survey instrument, was mailed electronically to all available firms
of the sampling frame. As per Dillman et al.’s (2009) Tailored Design Method guidelines,
several reminder emails, with an attachment of the questionnaire, were sent after the initial
electronic mailing.
Out of total 2,033 listings in the sampling frame, 286 email addresses proved to be defunct
and 256 email addresses were not available in the database of Hellastat. Pursuant to common
practice in business empirical researches, the response rate was adjusted for defunct and
missing email addresses (see Doving and Gooderham, 2008). Of the 1,481 firms that received
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the questionnaire, 268 usable completed questionnaires were received, reflecting an adjusted
response rate of 18.1 percent. The response rate of this survey compares favorably with the
response rate accomplished by email surveys in the field of strategic management (see Ensley
et al., 2002; Doving and Gooderham, 2008; Mahlendorf et al., 2012). As per common practice
(Armstrong and Overton, 1977), the independent sample t-tests and non-parametric
independent sample Mann-Whitney U tests between early and late respondents, suggest that
the answers of the respondents and non-respondents do not differ. In addition, the ANOVA
analyses as well as Kruskal-Wallis tests for the presence of bias among respondents indicate
that the responses among the various job-titled respondents do not differ1.
Analysis and results
The awareness of managers regarding the concept of competitive advantage was examined
using both quantitative and qualitative data analyses. The quantitative analyses include cross
tabulation, chi-square test for independence and logistic regression of data from closed-ended
questions. On the other hand, the qualitative data analysis is comprised of keywords and key
phrases of data from an open-ended question.
The research question of whether the practicing managers are aware of the concept of
competitive advantage was carried out using cross tabulation between the dichotomous
variable of competitive advantage as has been self-reported by senior managers (self-reported
competitive advantage), and the dichotomous variable of competitive advantage developed by
the subjective scale of firm competitiveness (perceived competitive advantage).
First of all, the Pearson chi-square statistic is statistically significant, χ2 (df = 1) = 8.062, p =
0.005, indicating that there is a statistically significant difference in the proportion of
perceived competitive advantage and the proposition of self-reported competitive advantage.
Therefore, the interpretation of the cell frequencies in the contingency table is warranted. As
can be seen from the results of the contingency table reported in Table 1, 126 managers, or 47
percent of total number of managers, correctly report that their firms have competitive
advantage. In addition, 30 managers, or 11 percent of the total managers in the study,
correctly report that their firms do not have competitive advantage. Thus, 58 percent of total
managers are in a position to identify the existence, or not, of competitive advantage and
therefore it can be assumed that they are aware of the concept of competitive advantage. On
the other hand, 36 percent of the total number of managers that corresponds to 97 managers,

1Results of t-tests, Mann-Whitney U tests, ANOVA analyses and Kruskal-Wallis tests are not reported
herein but they are available upon request.
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report that their firms have competitive advantage when in reality they do have. Lastly, 15
managers, or 6 percent of the total managers in the study, report that their firms have not
developed competitive advantage when in reality they have. Thus, a significant high
percentage of total managers, i.e. 42 percent, are not in a position to identify the existence of
competitive advantage and therefore it can be assumed that they are not aware of the concept
of competitive advantage. In addition, from those managers who are not in a position to
identify the existence of competitive advantage, the majority (87 percent) seems to
overestimate their company’s ability to develop competitive advantage.
Insert Table 1 about here
Nevertheless, since the result of chi-square test for independence is statistically significant, it
seems that the competitive advantage as perceived by the managers and the competitive
advantage as has been self-reported by the managers are related. Therefore, based on the
interpretation of the contingency table and on the chi-square test for independence, no
compelling conclusions regarding the relationship of the two variables could be drawn at this
stage.
In order to reaffirm the above inconclusive results, a robustness test was performed using
logistic regression with independent variable the self-reported competitive advantage and
dependent variable the perceived competitive advantage. From Table 2, one can see that the
difference in the log likelihood values (-2LL) between the base and proposed model is
minimal and that both -2LL values are considerably greater than zero, therefore suggesting
poor overall fit of the model (Hair et al., 2010). In addition, the value of Hosmer and
Lemeshow test indicates that the model fit is not acceptable. Moreover, the pseudo R square
measures, i.e. Cox & Snell R Square and Nagelkerke R Square, show that the logistic
regression model accounts for less than 4 percent of the variation between the two groups of
the dependent variable, i.e. existence and nonexistence of competitive advantage. Based on
the above the logistic regression model does not fit the data well. Thus, the results of the
logistic regression provide evidence that the practicing managers cannot identify the existence
or nonexistence of competitive advantage and therefore, they are not aware of the concept of
competitive advantage.
Insert Table 2 about here
The empirical investigation of managers’ awareness regarding the concept of competitive
advantage using quantitative data analyses was supplemented with qualitative data analysis.
Specifically, the results of managers’ answer to the open-ended question “what is the
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competitive advantage of your firm?” seem to verify the results of the quantitative data
analyses. Using keywords and key phrases (see Table 3), managers’ responses were classified
into the three dominant theoretical perspectives of strategic management regarding the
sources of competitive advantage. In particular, of the 223 total managers who reported that
their firm possesses competitive advantage, 188 accepted to state what their firm’s
competitive advantage is. From those 188 managers, 13 (7 percent) indicated as their firms’
competitive advantage a source of competitive advantage pertaining to the industrial
organization theory, such as an entry or exit barrier. In addition, 55 (29 percent) managers
mentioned a source of competitive advantage pertaining to market-led theory as their firms’
competitive advantage, such as cost leadership, differentiation and niche market focus. Lastly,
120 (64 percent) managers declared a source of competitive advantage pertaining to resource-
based theory as their firms’ competitive advantage, such as valuable, rare, inimitable and non-
substitutable resources as well as bundle of tangible or intangible resources, i.e. capabilities. It
is worth mentioning that 58, or 31 percent, out of total 188 managers, reported multiple
sources of competitive advantage, belonging to more than one perspective, as their firms’
competitive advantage. From the above, it is obvious that practicing managers seem to
confuse the concept of competitive advantage with the concept of sources of competitive
advantage. In addition, the majority of senior managers seems to confuse competitive
advantage with several of their firm’s resources and capabilities, which are in fact sources of
competitive advantage under the resource-based theory. The above finding is not entirely
surprising, given that the resource-based theory not only serves as a major theoretical
foundation in strategic management (Rouse and Daellenbach, 2002), but also it is prominently
featured in all major textbooks on the subject of business strategy (Newbert, 2007). Thus,
since much of what the strategy scholars write about, and teach has been greatly influenced
by the resource-based perspective, the managers that have received business education will
tend to adopt its fundamental arguments.
Insert Table 3 about here
Concisely, the combined results of the quantitative data analyses and the qualitative data
analysis, provide empirical evidence that self-reported competitive advantage and perceived
competitive advantage are not empirically equivalent. In other words, the practicing managers
seem not to be aware of the concept of competitive advantage and they tend to confuse it with
its sources, especially those pertaining to resource-based theory.
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Concluding remarks
Even though in literature there are studies that investigate managers’ awareness of various
popularly used management concepts (see Van Rossem and Van Veen, 2011), little research
has been carried out in order to investigate empirically the awareness of managers regarding
competitive advantage. This paper intends to shed some light into managers’ awareness of
competitive advantage, which is the most taken-for-granted concept of strategic management.
Competitive advantage is a buzzword, fuzzy and fashionable concept that causes confusion to
practicing managers, as academics have a tendency to use the term of competitive advantage
with different meaning in different contexts. In view of the fact that competitive advantage
has always suffered from a lack of semantic content along with the fact that many journals
and textbooks seem to define competitive advantage in terms of its sources, or the concept of
performance, it is doubtful that the practicing managers are aware of the concept of
competitive advantage. Indeed, this study provides empirical evidence that practicing
managers seem to confuse the concept of competitive advantage with the concept of sources
of competitive advantage, especially those pertaining to resource-based theory. The above
finding can be attributed to the fact that since the resource-based theory is universally
accepted in strategic management courses and textbooks, managers are educated and
instructed to find competitive advantages extensively among their firms’ idiosyncratic
resources and capabilities.
From an academic standpoint, by empirically investigating the awareness of managers
regarding competitive advantage, this study fills an important gap in the empirical literature.
The finding that practicing managers confuse the concept of competitive advantage with their
firms’ idiosyncratic resources and capabilities, provides support to the hypothesis that senior
managers are not aware of the concept of competitive advantage. The results of this study
could stimulate the discussion about the conceptual nature of competitive advantage and
could foster the convergence towards a precise and robust definition of competitive
advantage.
From a practitioner standpoint, the findings of the study along with the provided stipulative
definition of competitive advantage from literature, can increase practicing managers’
awareness relating to the conceptual nature of competitive advantage. The improved
understanding of its conceptual nature by practicing managers, in turn, can specify the latent
expressions of competitive advantage, describing what is and what not competitive advantage
is. This is extremely important because such cognitive error, regarding the concept of
competitive advantage, results to deviation from the aim of business strategy. In other words,
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because managers’ decisions concerning the development of competitive advantage are based
on erroneous information about the true content of competitive advantage, firms may often
and mechanically implement resource-based strategies that do not result in superior
performance. Therefore, practicing managers should bear in mind that sources of competitive
advantage, competitive advantage and superior performance are distinct concepts (see Figure
1). The sources of competitive advantage are the mobility barriers (factors that impede the
ability of firms to enter or exit an industry), the market positions (low cost, differentiation or
niche market focus), as well as the idiosyncratic firm resources (valuable, rare, inimitable and
non-substitutable financial, physical, human, relational resources) and capabilities
(competencies derived from a bundle of valuable, rare, inimitable and non-substitutable
tangible or intangible resources). On the other hand, competitive advantage is the above
industry average manifested exploitation of market opportunities and neutralization of
competitive threats, whereas superior performance is the above industry average financial and
operational performance. For managers, the challenge should be to ex ante identify, develop,
protect, and deploy idiosyncratic firm resources and capabilities, and/or market positions,
and/or mobility barriers [which are all sources of competitive advantage], as grounds for
establishing competitive advantage [i.e. above average exploitation of market opportunities
and neutralization of competitive threats] and, thereby, generate superior performance [i.e.
above average financial and operational performance].
Insert Figure 1 about here
Naturally, due to the lack of previous efforts to investigate empirically managers’ awareness
regarding the concept of competitive advantage and because of the contradicting results of
chi-square test for independence as compared to the interpretation of contingency table,
logistic regression results and to keywords and key phrases data analysis, the findings
presented herein need further investigation. In finding further support of the hypothesis that
senior managers are not aware of the concept of competitive advantage, scholars will have
more rigorous evidence about the impairing effect to practicing managers’ awareness caused
by the lack of a clear theoretical definition for the concept of competitive advantage. This, in
turn, would hopefully strengthen the efforts of academics to reach a consensus regarding the
conceptual nature of competitive advantage.
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2015, Management Decision, 53(9): 2004-2016. DOI: 10.1108/MD-05-2015-0185
17
Table 1: Cross tabulation between perceived competitive advantage and self-reported
competitive advantage
Competitive Advantage -
Self-reported
Total
Existent Non-existent
Competitive
Advantage -
Perceived
Non-
existent
Count 97 30 127
Expected Count 105.7 21.3
% of Total 36% 11%
Existent
Count 126 15 141
Expected Count 117.3 23.7
% of Total 47% 6%
Total Count 223 45 268
Table 2: Robustness test: logistic regression model
-2 Log Likelihood (-2LL) of Base Model 370.795
-2 Log Likelihood (-2LL) of Proposed Model 362.648
Difference of -2LL for Base and Proposed Model 8.147
Sig. of chi-square test of -2LL Difference 0.004
Chi-square of Hosmer & Lemeshow test 0.000
Cox & Snell R Square 0.030
Nagelkerke R Square 0.040
Note: Dependent variable the perceived competitive advantage and independent variable the self-reported competitive
advantage
2015, Management Decision, 53(9): 2004-2016. DOI: 10.1108/MD-05-2015-0185
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Table 3: Keywords & key phrases for the classification of manager’s responses into the
dominant theoretical perspectives of strategic management
Industrial Organization Theory Market-led Theory Resource-based Theory
1. Biggest in the industry (EEB)
2. Binding agreements with
suppliers and customers (EEB)
3. Distance – Low Transportation
Cost (EEB)
4. Economies of scale (EEB)
5. Exclusive products (EEB)
6. Geographical location (EEB)
7. Large network size (EEB)
8. Monopolistic position (EEB)
9. Plant/production site (EEB)
10. Reciprocate subsided fee
(EEB)
11. Size (EEB)
12. Strong market share (EEB)
1. Better quality compared with
peers (DIF)
2. Competitive prices (DIF)
3. Competitive products/services
(DIF)
4. Different products/services
from competition (DIF)
5. Differentiation (DIF)
6. Entrance in new markets
(NMF)
7. Focus (NMF)
8. Innovation of
products/services (DIF)
9. Local company (NMF)
10. Low price compared to value
(CL & DIF)
11. Lowest cost (CL)
12. Market leader (CL & DIF)
13. Market position (CL & DIF)
14. Particularization/
customization (DIF)
15. Premium products/services
(DIF)
16. Price of products/services
(CL)
17. Product/service concept (DIF)
18. Quality of products/services
(DIF)
19. Relationship between quality
and price (CL & DIF)
20. Reliability of
products/services (DIF)
21. Renown products/services
(DIF)
22. Strong brand name (DIF)
23. Value for money (CL & DIF)
24. Wide recognition of
products/services (DIF)
1. Active /supportive
shareholders (IFR)
2. Adoption of new technologies
(IC)
3. Capacity for new product
development (IC)
4. Company’s nationality (IFR)
5. Company’s reputation (IFR)
6. Competent human capital
(IFR)
7. Customer service (IC)
8. Customer-focused approach
(IC)
9. Experience (IC)
10. Facilities/ warehouse /fleet of
trucks (IFR)
11. Financial liquidity (IC)
12. Financial strength (IFR)
13. Focus on customers’ needs
(IC)
14. Internal procedures (IC)
15. Know-how (IC)
16. Knowledge / expertise (IC)
17. Low labor cost (IFR)
18. Low operating cost (IC)
19. Marketing and distribution
(IC)
20. Member /subsidiary of a
strong group (IFR)
21. Not an impersonal company
(IC)
22. Operational flexibility (IC)
23. Operational robustness (IC)
24. Process innovation (IC)
25. Product portfolio (IC)
26. Production capacity (IC)
27. Production cost (IC)
28. Prompt decision making (IC)
29. Quality of processes (IC)
30. Research and development
(IC)
31. Solvency /credibility (IC)
32. Strong management (IC)
33. Tangible assets and equipment
(IFR)
34. Teamwork (IC)
35. Technological infrastructure
(IFR)
36. Training of human capital
(IFR)
2015, Management Decision, 53(9): 2004-2016. DOI: 10.1108/MD-05-2015-0185
19
Abbreviations
EEB: Entry & Exit Barriers, CL: Cost Leadership, DIF: Differentiation, NMF: Niche Market Focus, IFR: Idiosyncratic Firm
Resources, IC: Idiosyncratic Capabilities
2015, Management Decision, 53(9): 2004-2016. DOI: 10.1108/MD-05-2015-0185
20
Figure 1: Concepts and relationships of the ‘Sources of Competitive Advantage-
Competitive Advantage-Superior Performance’ conceptual framework
Sources of Competitive
Advantage
1. Industrial organization
theory: Mobility barriers
(entry and exit barriers)
2. Market-led theory: Market
positions (cost leadership,
differentiation and niche
market focus)
3. Resource-based theory:
Idiosyncratic firm resources
(valuable, rare, inimitable
and non-substitutable
financial, physical, human,
relational resources)
Idiosyncratic capabilities
(competencies derived from
a bundle of valuable, rare,
inimitable and non-
substitutable tangible or
intangible resources)
Competitive
Advantage
Above industry
average manifested
exploitation of
market
opportunities and
neutralization of
competitive threats
Superior
Performance
Above industry
average financial
and operational
performance
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