Firm-Specific and Non-Firm-Specific Sources of Advantage in International Competition

In this chapter we provide a comprehensive analysis of the sources of the firm’s advantage in international competition. The analysis of competitive advantage has been a primary concern of strategic management (Rumelt, Schendel and Teece 1994) and especially of resource-based theory (RBT) (Wernerfelt 1984). RBT argues that the firm achieves an advantage over competitors based on its advantageous or strategic resources (Barney 1991; Amit and Shoemaker 1993; Peteraf 1993). According to this theory, only resources exclusive to the firm can form the basis of its advantage — that is, the sources of advantage are firm-specific This argument assumes that competitors are located in the same geographical area and have access to the same types of external resources. However, when we extend the analysis of advantages to internationally competing firms in different locations, the picture changes. Access to different external resources in different locations, or the firm’s ‘foreignness’, can assist the company in achieving an advantage relative to firms in other locations. Such advantages are available to a group of firms — that is, the sources of advantage can also be non-firm-specific.