Scandinavian Working Papers in Economics
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Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2009/11:
Evidence on Competitive Advantage and Superior Stock Market Performance

Øystein Gjerde (), Kjell Henry Knivsflå () and Frode Sættem ()

Abstract: This article analyzes the value-relevance of industry-based and resource-based competitive advantage in a large sample of firms listed on the Oslo Stock Exchange. We measure competitive advantage by a single variable and perform a new decomposition into its underlying sources. In 1986-2005, the industry-based and the resource-based competitive advantage explain more than 20% of abnormal stock market returns, accumulated over five years. The resource-based advantage is almost four times more important than the industry-based advantage. Differences in both the return and the risk capability of firms’ net assets relative to their industry peers are significant parts of the resource-based advantage, estimated at 60% and 40%, respectively.

Keywords: Competitive advantage; superior performance; value-relevance of performance metrics; (follow links to similar papers)

JEL-Codes: L25; (follow links to similar papers)

51 pages, October 20, 2009

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