1. Prepared by: Enrique, Lihong, John, Jongkuk
Asset Stock Accumulation and Sustainability of Competitive Advantage Ingemar Dierickx and Karel Cool (1989) Management Science, 35 (12):
Prepared by:
Enrique, Lihong, John, Jongkuk

2. Introduction
The strategy literature focuses on privileged market positions for competitive advantage
It neglects the idea that resource bundles need to be deployed to achieve and protect these positions
It is these bundles of assets that actually give a competitive advantage
How can these assets be protected?

3. The Factor Markets
Strategic factor market = “a market where the resources necessary to implement a strategy are acquired.”
Firms will not be able to get above average economic returns unless these (input) factor markets are imperfect, the firm has superior information, or they are lucky (Barney 1986)

4. Limits of the Factor Markets
Not all resources can be bought and sold quickly, and many cannot be bought or sold at all:
Quality
Toughness
Trust
Loyalty

5. Accumulation of Asset Stocks
When assets are non-tradeable it must be deployed to realize its economic value
Reputation, R & D, and other firm-specific assets build up over time as “flows,” and are stored as stocks (e.g., advertising)
These “flows” can be adjusted instantaneously, however stocks cannot

6. What makes a strategic asset?
Strategic assets must be:
Non-tradeable
Non-imitable
Non-substitutable

7. Sustainability of Privileged Asset Positions
Imitation of an asset depends on:
Time compression diseconomies
Asset mass efficiencies
Inter-connectedness of asset stocks
Asset erosion
Causal ambiguity
Substitution of asset stocks

8. Conclusions
What are the economic opportunity costs of privileged market positions?
Not all strategic assets are tradeable
Many strategic assets must be built over time
What makes these strategic assets economically valuable?