Competitive Heterogeneity

It is widely accepted that positioning for competitive advantage is related to how value is created and captured. Yet, despite substantial theoretical work on competitive advantage, empirical work has been less cohesive and accretive. Contributing factors include, but are not limited to, differences in conceptual definitions, misalignment between theory and operational designs, and variation in analytical approaches. In response, the theory of competitive heterogeneity emerged with the intent of providing a more comprehensive explanation of persistent differences in intra-industry performance, the core focus of the strategy field. Formally, competitive heterogeneity refers to enduring and systematic (superior) differences in strategic positioning—and, in turn, performance—among relatively close rivals, where a firm that produces the largest gap between the value (V) of a good or service to a buyer and the cost (C) of producing that value holds an advantage, or superior position, relative to that of rivals. The theory adopts a bargaining model (Value-Price-Cost) to define superior performance differences independently of resources and capabilities. If resources or capabilities associated with performance heterogeneity are not protectable, then the persistence of an advantage must be associated with something other than costly imitation. It follows, then, that important sources of value and cost differences among firms may lie outside the Resource-Based View’s (RBV’s) boundaries. As such, work on competitive heterogeneity has broader theoretical roots than the RBV. Additionally, research on the factors and conditions promoting persistent and systematic (superior) differences in performance among firms benefits from the integration of multiple theoretical lenses, research methods, and techniques. This diversity informs a wide array of research topics (e.g., the Value-Price-Cost model; value-based strategies; value creation and value capture dynamics; value appropriation; performance heterogeneity; persistent performance heterogeneity; temporary advantage; isolating mechanisms and barriers to imitation; micro and macro influences) and employs a host of analytical techniques (empirical, descriptive, formal theory, mathematical modeling). This bibliography discusses the contributions from these complementary areas but the bibliography’s scope (and page limits) precludes a detailed treatment of all areas that intersect with competitive heterogeneity and its origins. As a result, and guided by the definition of competitive heterogeneity, this annotated bibliography provides an overview of the primary research streams, with specific attention to influential writings and those that detail the scope of contributions in an area. The research topics are presented in a particular order, beginning with the theory’s core, the Value-Price-Cost bargaining model, conceptual definitions, and theoretical insights, and then shifting to empirical studies on performance heterogeneity, persistent advantage, and value creation and capture.