Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

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

Øystein Gjerde (), Kjell Henry Knivsflå () and Frode Sættem ()
Additional contact information
Øystein Gjerde: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
Kjell Henry Knivsflå: Dept. of Accounting, Auditing and Law, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Accounting, Auditing and Law, Helleveien 30, N-5045 Bergen, Norway
Frode Sættem: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway

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

JEL-codes: L25

51 pages, October 20, 2009

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