Heterogeneity of Resources and Performance in the Hotel Industry

Abstract

Resource heterogeneity is a key aspect of one of the most important theories of strategic management: the resource-based view of the firm. This theory suggests that the performance effects of a firm’s strategy depend on the firm’s individual resources and capabilities and the setting within which it is operating. In this article, we argue that the current methods for measuring hotel performance and its determinants may be inconsistent with this theory. To measure efficiency, hotels should be viewed as heterogeneous firms, and the relationships between determinants and performance must be assessed for each individual hotel rather than as an average across hotels. Accordingly, we use a random-effect Bayesian stochastic frontier model to estimate the profit frontier and the effect function of the inefficiency for each hotel. The results indicate that hotels tend to choose strategies based on the heterogeneous resources that maximize their performance in their individual statuses.