The Competitive Dynamics of Entrepreneurial Market Entry

The Competitive Dynamics of Entrepreneurial Market Entry

The Johns Hopkins University series on Entrepreneurship

Edited by Gideon D. Markman and Phillip H. Phan

Research on general market entry usually focuses on large enterprises. Often, however, small entrants can alter the competitive dynamics of an industry. This volume brings together the most prominent thought leaders and the best research on the asymmetric entrant-incumbent dynamics. The ideas presented offer a more nuanced perspective on how, when, where and with what consequences small, single-product firms enter markets that are dominated by large, multiproduct and multimarket incumbents.

Chapter 5: Entrepreneurship, Competitive Dynamics, and a Resource-based View of Competitive Advantage

Margaret A. Peteraf and Jay B. Barney

Subjects: business and management, entrepreneurship, economics and finance, industrial economics


Margaret A. Peteraf At the time that ‘Unraveling the resource-based tangle’ (Peteraf and Barney, 2003) was written, two serious criticisms of resource-based theory had emerged that we believed were based on some misunderstandings and that had not yet been fully addressed. The first was that the theory was tautological in its treatment of competitive advantage; the second was that it did not apply to dynamic environments and therefore had little relevance for the study of such important topics as entrepreneurship, innovation, technical change, competitive dynamics, and so on. (See, for example, the critiques of resource-based theory [RBT] offered by Schulze, 1994; Mosakowski and McKelvey, 1997; Bromiley and Fleming, 2000; Priem and Butler, 2001; Foss and Knudsen, 2003.) Our paper was written as a direct response to Foss and Knudsen (2003) and was paired with theirs when it was published. Addressing these criticisms gave us an opportunity to show how our earlier papers (Barney, 1991 and Peteraf, 1993) related to one another, to update them in light of subsequent work, and to sharpen the resourcebased view (RBV) of competitive advantage. In answering the charge of tautology, we provided a definition of competitive advantage centered on economic value created rather than profitability—a definition more consistent with economic understandings of this term, despite the frequency with which the term ‘competitive advantage’ is otherwise used. Doing this made it clear that there is no direct or circular link between resources and performance, building on the work of RBV scholars such as Coff (1999)...

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