When firms seeking to develop resources to implement a strategy (strate- gizers) and those who currently own or control these resources (con- trollers) have exactly the same, and perfectly accurate, expectations about the future value of product market strategies before they are actually imple- mented, then the price of the resources needed to conceive and implement these strategies will approximately equal their value once they are actu- ally implemented. This is a conclusion of zero economic rents consistent with all perfect information models of competition where no competitive uncertainty exists (Lippman and Rumelt 1982). Under these perfect expec- tation conditions, controllers will never make their resources available if the full value of those resources is not reflected in their price, nor will strategizers pay a price for a resource greater than its value in actually implementing a strategy. In such markets, all rents that could have been had when the strategy in question was implemented will be anticipated and competed away.
This conclusion has been examined empirically in several different strategic factor markets. For example, in the market for corporate control, it has been well documented that when several firms compete to acquire the same target to accomplish the same strategic objectives, that the price of this target will rapidly rise to equal its value in realizing this strategic objective (Jensen and Ruback 1983). This is one reason that bidding firms in the market for corporate control usually just break even on their merger and acquisition strategies.
However, this conclusion also applies to some less well-studied strategic factor markets. For example, suppose a firm concludes that, in order to implement its product market strategies, it must enhance the reputation of its products. Enhancing product reputation is likely to require several strategic resources—some of which a firm may already possess and some of which it may need to develop. For example, this firm is likely to have to hire some quality management professionals, consultants, and employees who will then have to change this firm’s orientation toward quality. Alterna- tively, this firm may invest to train some of its current employees in quality processes. Also, this firm is likely to have to hire or train some research and development specialists to develop new extensions of its current products, some marketing people to help position these products in the marketplace, and sales people who can sell this new type of product. It is also likely to have to invest in marketing campaigns to help develop its product market reputation. Of course, to the extent that this firm’s competition becomes aware of its strategies, they might also begin to assemble the resources needed to compete in this new way.
The aggregate cost of developing the resources necessary to imple- ment this new product market strategy—whether through hiring new employees, training and reassigning current employees, or making other investments—can be substantial. If those that control each of these resources—be they current or future employees, marketing outlets, and so forth—anticipate their impact on this firm’s ability to implement its new strategy, they will each require a payment equal to the value of their resource for the firm.2 In this setting, the total cost of developing the resources necessary to implement this product market strategy will equal the value this strategy creates in the product market, and even if this firm is successful in creating competitive imperfections in the product market, it will still not generate competitive advantages.
Source: Barney Jay B., Clark Delwyn N. (2007), Resource-Based Theory: Creating and Sustaining Competitive Advantage, Oxford University Press; Illustrated edition.