Appropriating Economic Rents from Resources: An Integrative Property Rights and Resource-Based Approach

Jongwook Kim and Joseph T. Mahoney
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Jongwook Kim: Western Washington U
Joseph T. Mahoney: U of Illinois at Urbana-Champaign

Working Papers from University of Illinois at Urbana-Champaign, College of Business

Abstract: Resource-based theory focuses on how economic value is created and sustained, providing the theoretical underpinnings for explaining and predicting sustainable competitive advantage. An implicit assumption of resource-based theory is that the firm's property rights to such resources are secure. However, where property rights to potentially value-creating resources are not fully secure, as in business contexts where multiple parties are jointly participating in creating economic value, potentially value-creating combinations of resources may not be realized. Similar difficulties may arise within the firm, where multiple stakeholders that supply factor inputs are jointly producing economic value. To address these theoretical issues, we map out a property rights theory of the firm that is grounded in resource-based theory on economic rents. We emphasize how firms create economic rents (ex ante) as well as how firms appropriate or capture economic rents (ex post).

Date: 2005
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