Firm and Industry Effects within Strategic Management 217 allocation for the development of similar types tures do not capture idiosyncratic resources that of resources by two firms in the same industry provide competitive advantage. Although it is do not lead to possession of the same resources. irreversible investments in resource development is as ered and ad ert ngos ynctratc resources the basis e f competive advanta s cdis rick and Our findings support RumeIt's (1991)con- Cool, 1989), these resource development strate- clusion that firms' unique resource endowments, gies are easy to observe and easy to imitate and not the participation in a particular industry, Hence, firm-level proxies like R&D and advertis are the cause of differences in performance. The ing expenditures capture broad classes of higher magnitude of firm effects on performance resources, not the idiosyncratic firm resources or than on strategy may be explained by the idea resource development processes that form the of'multifinality'reported by Lawless, Bergh, and basis of competitive advantage. Thus models of wilsted (1989): even when firms follow similar competitive advantage within the resource-based strategies, the idiosyncrasy in their resources leads view are applicable only at low levels of analysis, to heterogeneous performance outcomes unobservable to the competition. The challenge A comparison of the 5-and 15-year periods is to carry out empirical research at an appropriate for all three variables shows a decrease in the level of aggregation and develop normative guid industry effects and the reduction in the pro- ance on leveraging the four drivers of competitive portion of variance explained jointly by industry advantage within the resource-based view and firm effects. This trend could be the net resources, routines, replication, and rents result of an interaction between long periods of (winter, 1995) convergence and punctuated reorientations Only fine-grained analysis of resource hier (Tushman and romanelli, 1985). As predicted by archies at lower levels of aggregation can help industrial organization, longer periods increase managers identify the true sources of competitive the chances of competition settling down, and advantage. Attempts to generalize the value of allow a long-term equilibrium to be reached unique resource-product-market positions would within the industry: this explains an increase in undermine the basic premises of strategic man industry effects. However, an increasing time pe- agement. Strategy is about differentiating a firm riod increases the chances of ha Schumpet- from its competitors, and the task of the general erian revolution that changes the nature of compe- management is to adjust and renew firm resources tition as well; this explains the decrease in the as time, competition, and change erode their value proportion of variance explained by industry (Rumelt, 1987). Hence strategy researchers should focus on differences and not similarities Together, firm and industry effects explain in resources(Hatten and Hatten, 1987; Werner- between 74 percent and 94 percent of the total flet, 1985) variance in strategy variables. The low level of error(ranging from 6 percent to 15 percent)for core strategies offers support to the concept of REFerENCES strategy as a pattern. Once a strategy is chosen whether it is deliberate or emergent, and whether Alchain, A (1950).'Uncertainty, evolution, and eco- nomic theory, Journal of Political Economy, 58(3), it is followed by competitors or unique, strategIc pp. 2 11-221 positioning tends to be maintained over time Amit, R. and P. J. H. Schoemaker(1993). ' Strategic assets and organizational rent, Strategic manage IMPLICATIONS FOR FUTURE Andrews, K.(1971). The Concept of Corporate Strat RESEARCH Ansoff 1965). Corporate Strategy, McGraw- Our results suggest that models of competitive Bain, J. S.(1972). Essays on Price Theory and Indus- advantage within the resource-based view could bride rmnizanton. Har improve their prescription value by measuring Balakrishnan, S. and I. Fox(1993). 'Asset specificity, resources at lower levels of aggregation. Firm- firm heterogeneity and capital structure, Strategic level proxies like R&D and advertising expendi- Management Journal, 14(1), pp 3-16 e 1998 John wiley Sons, Ltd. stran.Mgmt.J,vol.19.211-219(1998)