Working Paper Series, Department of Industrial Economics & Strategy, Copenhagen Business School
No 02-3:
Creating, Capturing and Protecting Value: A Property Rights-based View of Competitive Strategy
Kirsten Foss and Nicolai J. Foss
Abstract: This paper develops a property rights-based view of
strategy (the “PRV”). A property right (or economic right) is an
individual’s net valuation, in expected terms, of the ability to directly
consume the services of an asset (including, e.g., a monopoly position) or
consume it indirectly through exchange. Resources expended on exchanging,
protecting and capturing such rights are transaction costs, so that we
directly link property rights, transaction costs, and economic value. We
assume that all relevant exchange is costly and that all agents maximize
their property rights. We argue that economizing with transaction costs
become a distinct source of value, and potentially of sustained competitive
advantage in such a setting. Strategizing revolves around influencing
impediments (i.e., transaction costs) to value creation. Expectations and
contracting also become crucial parts of processes of creating, protecting
and capturing value. We use these insights to derive a number of refutable
propositions, and argue that key insights from both industrial organization
economics and the resource-based view are consistent with the PRV.
JEL-Codes: D23; L11; L22; (follow links to similar papers)
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