SOURCES OF SUPERIOR PERFORMANCE 955 In addition to the above measurement concern, tests of the theory often involve serious sample selection problems. This issue is best understood from the perspective of the resource-based view of the firm( Wernerfelt 1984; Rumelt 1984; Montgomery and Wer nerfelt 1988). From a resource perspective, firms earn higher profits, and generally have higher market shares, if they have"better"resources. Better resources in turn are those which convey the firm a competitive advantage and are impossible for competitors to replicate at equal cost. Market equilibria should be understood as contingent on given resource profiles. If relative resources change, equilibrium market shares will typically change also. For example, if a firm gets a patent, is lucky with an advertising theme or otherwise gains fundamental competitive advantage both its market share and its value should go up The argument that market share as an asset should be properly priced contingent on stable underlying resource profiles. Any test which fails to control for shifts in fundamental resource positions will be seriously biased. While there are ma to separate such spurious effects from causal effects, one possibility is to focus on groups of firms whose relative competitive strengths have remained essentially unchanged. To the extent that one fails to" cleanse"the sample in this way there may be a positive bias in estimates of the relationship between changes in market share and changes in value (In our view this is a major problem with Sullivan 1977) Much prevailing thought in strategic management follows the framework for industry analysis introduced by Porter(1980). This framework is in turn heavily influenced by le so-called"classical"school in industrial economics( Bain 1951). According to this view, a major component in firm performance is the ability of industr curtail competitive rivalry. Within economics. the classical school has been under fire from the "revisionists Demsetz 1973), who interpret inter-industry differences in profit rates as results of differences in relative firm efficiency, rather than results of differences in competitive restraint. The revisionists operationalized the controversy as a question of whether con centration(collusion )or market share(efficiency differences )correlated most strongly with performance. The initial empirical evidence seemed to favor the revisionists. How ever, several recent papers(Schmalensee 1985; Wernerfelt and Montgomery 1988)have compared the market share effect with an industry (rather than just concentration )effect In these papers, industry fares much better than market share, explaining 15-20 percent of the variance in returns, versus less than one percent for market share. This result has been interpreted as evidence that some industries enjoy positive collusive benefits, while others are more perfectly competitive. A complementary interpretation, that some in dustries with high fixed costs get caught in periods of excessive price competition leading to negative effects, has not been put forward. On the other hand, this phenomenon is well known in the theoretical literature( Green and Porter 1984)and, to the extent that it occurs, the evidence on industry effects is much less damaging to the revisionist view. 3. The Study We first present a very direct test of the hypothesis that gains in market share which are not prompted by shifts in fundamental resource positions result in no value creation Specifically, we consider the six major players in the U. S brewing industry between 1969 and 1979. This sample was chosen for several reasons. First, it consists mostly of public traded single business firms. Changes in value therefore can be measured and related to changes in shares of the beer market. Second, the industry was quite unstable during the riod in question, such that changes in market share and value are nontrivial. third, the industry has been the subject of several studies( Schendel and Patton 1978; Lynk 1984), to which we can relate our findings