On the Origins of Competitive Advantage: Strategic Factor Markets and Heterogeneous Resource Complementarity

Strategic factor market theory suggests that, excluding luck, superior expectations are necessary for firms to appropriate gains from valuable resources. I argue that this is only true in the absence of heterogeneous resource complementarity. Extending factor market theory, I show that firms can profit when they exhibit superior complementarity to target resources, and I determine the components of appropriated value in such markets. I thus demonstrate the power and simplicity of coalitional analysis while shedding light on central issues in strategic management.