Competitive Advantage Logics

Abstract

Why do some firms pick superior resources, opportunities, or activity systems? The answer lies in our entrepreneurial logic in that the competitive advantage lies in the firm’s value creation and appropriation mechanism that is enhanced by entrepreneurial incentives. The extant strategic logics are contrasted with our entrepreneurial logic. The resource-based views assume that the firm always delivers superior performance when a strategic resource is present. The positioning view assumes that managers will always recognize and act on attractive strategic positions in a timely manner, and configure superior value activities that provide the firm competitive advantage. Entrepreneurial incentives induce the entrepreneurial behavior that empowers managers to overcome traditional behavioral bounds and enhance the firm’s learning, adaptation, agility, and cognition. The entrepreneurial behavior of a firm meets the conditions of the source of competitive advantage, namely, scarcity, imperfect imitability, and imperfect mobility. It is not the firm’s strategic resources or strategic position per se but the entrepreneurial incentives that provide the executives a powerful motivation to earn an entrepreneurial surplus, which enhances their execution of the business model mechanism and provides the firm competitive advantage.