Creating, Capturing and Protecting Value A Property Rights-based View of CompetitiveStrategy

Kirsten Foss and Nicolai Foss ()

No 02-02, DRUID Working Papers from DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies

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; thus, 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. This implies that economizing with transaction costs may be a distinct source of value, and potentially of sustained competitive advantage. Moreover, strategizing may be understood as revolving 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.

Keywords: Property rights; transaction costs; industrial organization (search for similar items in EconPapers)
JEL-codes: D23 D4 L1 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (4)

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