Competence Systemics and Survival: Simulation and Empirical Analyses

The aim of this paper is to give empirical evidence of the fundamental mechanisms underlying the resource systemics: time compression diseconomies, asset mass efficiency, and interconnectedness of assets. It assumes that time, resource properties and interactions are the critical elements leading to accumulation of idiosyncratic resources, firm performance and survival. Results from a Cox regression on a simulated dataset confirm the protective effects of time compression diseconomies, asset mass efficiency, and interconnectedness of assets against firm’s death. INTRODUCTION This study investigates the linkages between a descriptive competence-based view (CBV) of the firm and the rationales for sustainability of a firm’s competitive advantage. Sanchez, Heene, and Thomas (1996) and Sanchez and Heene (1997) have proposed a model of the firm based on tangible and 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 3B2v8:06a=w ðDec 5 2003Þ:51c XML:ver:5:0:1 AABS : 9003 Prod:Type: pp:33258ðcol:fig::NILÞ Competence Perspectives on Resources, Stakeholders and Renewal Advances in Applied Business Strategy, Volume 9, 33–58 Copyright r 2005 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0749-6826/doi:10.1016/S0749-6826(05)09003-7 33 intangible assets organized under a firm’s logic. They developed a ‘‘competence systemics’’ that relates stocks of resources and competencies to flows of investments, following Dierickx and Cool (1989). The rationales underlying a sustainable competitive advantage promoted by the CBV, and nurturing the competence systemics, are often cited by academics. Dierickx and Cool (1989) have distinguished different factors that protect the firm’s competitive advantage from imitation, like time compression diseconomies (TCD), asset mass efficiency (AME), or interconnectedness of asset stocks (IAS). Although often cited, and commonly used in the competence-based explanation of a firm’s success, there is still little empirical evidence of the effectiveness of these factors in sustaining performance (Williamson, 1999). It is difficult to avoid the tautology stating that successful companies benefit from unique resources and competencies; and that to be successful, a firm should nurture unique resources (Porter, 1991; Mosakowski & McKelvey, 1997; Williamson, 1999). If we show how favorable factors (TCD, AME, and IAS) lead to performance, we make progress in disentangling the process leading to uniqueness and value. In addition, if shown to be effective, we can assess whether these factors contribute identically or not to a firm’s sustainable competitive advantage. Therefore, the challenge of competence systemics is to pass from arguments to empirical results. However, in these matters, stringent tests face severe problems. First, by nature, such a study needs exhaustive and longitudinal data. Several high costs characterize this type of field research. Access to information is lengthy to obtain, and hard to exploit. Indeed, a competence-based research implies practically to having precise information on the evolution of each firms’ resource, period by period – and this kind of information is extremely difficult to gather. Besides, subjective interpretations may shed some dim light on questionable conclusions. Actors may change, events happen that distort the framework. Second, assessing the effects of TCD, AME, and IAS, other conditions being equal, on the sustainability of a firm’s competitive advantage requires to choose a relatively stable field study. Although difficult to meet, this condition, if satisfied, does not prevent subsequent questions from emerging. Notably, a field study may provide some insights on the validity of some of these rationales. Nevertheless, more definite results would require testing different configurations of these rationales. For the purpose of the competence systemics, field studies do not enable research to conclude on the robustness and overall validity of their results. 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 AABS : 9003 RODOLPHE DURAND AND ZAHIA GUESSOUM 34