Contextuality Within Activity Systems and Sustainability of Competitive Advantage

Executive Overview Research on the interactions among activities in firms and the extent to which these interactions help create and sustain competitive advantage has rapidly expanded in recent years. In this research, the two most common approaches have been the complementarity framework, as developed by Milgrom and Roberts (1990), and the NK-model (Kaufman, 1993) for simulation studies. This paper provides an introduction to these approaches, summarizes key results, and points to an aspect of interactions that has not found much attention because neither of the two approaches is well-suited to address it: contextual interactions, i.e., interactions that are influenced by other activity choices made by a firm. We provide a number of examples of contextual interactions drawn from in-depth studies of individual firms and outline suggestions for future research.