Invited Editorial: The Four Theories of Profit and Their Joint Effects

Makadok, Richard

doi:10.1177/0149206310385697

Cited by 101 publications

(88 citation statements)

References 75 publications

(108 reference statements)

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“…Makadok (2003Makadok ( , 2011 offers a useful categorization of the major theories in strategic management. He organized them by their causal profit mechanisms.…”

Section: Technology As a Basis For Market Cooperation Strategymentioning

confidence: 99%

“…From this perspective, market concentration and barriers to entry that limit the competition on price and leads to increased average industry profit (Makadok 2011).…”

Section: Market Cooperation and Firm Profitmentioning

confidence: 99%

“…Establishing and defending an attractive position in the marketplace enables a firm to either gain pricing power towards consumers or gain bargaining power towards suppliers. Following the analysis of Makadok (2003Makadok ( , 2011 and Drnevich and Croson (2013), the economic profit mechanisms for the firm in this perspective include both operational efficiency advantages, so called Ricardian rents (Ricardo 1817). These are traceable to market power and position relative to suppliers and monopoly-related rents (Bain 1956).…”

Section: Market Cooperation and Firm Profitmentioning

confidence: 99%

“…Drawing on the Makadok's (2006Makadok's ( , 2011 categorization of strategic management theory, Drnevich and Croson (2013) explored whether and how IT investments contribute to the four value-creating mechanisms. Their conclusion is that there are possibilities for IT-based value creation in all four profit mechanisms (collusion, governance, competence, and flexibility), but there is a lack of theory related to the link between technology investments and the mechanisms that generate value.…”

Section: Theoretical and Practical Relevancementioning

confidence: 99%

“…We do this by developing the mobile payment market cooperation (MPMC) framework, which is based on an integration of market cooperation theory 1 (Makadok 2003(Makadok , 2011 and ecosystems theory from the business technology domain (Adomavicius et al 2007, Basole and Karla 2011, Moore 1996, Selander et al 2013.…”

Section: Introductionmentioning

confidence: 99%

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The new normal: Market cooperation in the mobile payments ecosystem

Hedman

Henningsson

2015

Electronic Commerce Research and Applications

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a b s t r a c tThe introduction of mobile payments is one of many innovations that are changing the payment market. This change involves new payment service providers entering this lucrative market, and meanwhile, the existing stakeholders are trying to defend their oligopolistic positions. The mobile payment market cooperation (MPMC) framework in this article shows how the digitalization of payments, as a technology innovation, affects the competition and collaboration among traditional and new stakeholders in the payment ecosystem at three levels of analysis. We do this by integrating theories of market cooperation with the literatures on business and technology ecosystems. The MPMC framework depicts technologybased market cooperation strategies in the context of recent battles in the mobile payments ecosystem. In these battles, the competitors can use technology either in defensive build-and-defend strategies to protect market position, or in offensive battering-ram strategies for ecosystem entry or position improvement. Successful strategies can lead to: (1) Ricardian rents, based on operational efficiency advantages traceable to the firm's position relative to suppliers and monopoly power; and (2) Bainian rents, resulting from the extent the firm is able to resist price competition in the market. We validate the framework that we propose through three case studies of technology-based market cooperation in the mobile payments ecosystem.Ó 2015 Published by Elsevier B.V.

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“…Makadok (2003Makadok ( , 2011 offers a useful categorization of the major theories in strategic management. He organized them by their causal profit mechanisms.…”

Section: Technology As a Basis For Market Cooperation Strategymentioning

confidence: 99%

“…From this perspective, market concentration and barriers to entry that limit the competition on price and leads to increased average industry profit (Makadok 2011).…”

Section: Market Cooperation and Firm Profitmentioning

confidence: 99%

Section: Market Cooperation and Firm Profitmentioning

confidence: 99%

Section: Theoretical and Practical Relevancementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

The new normal: Market cooperation in the mobile payments ecosystem

Hedman

Henningsson

2015

Electronic Commerce Research and Applications

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Uncovering the hidden transaction costs of market power: A property rights approach to strategic positioning

Foss

Klein

2017

Manage Decis Econ

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A central construct in competitive strategy research is market power, the ability to raise price above marginal cost. Positioning research focuses on attempts to build, protect, and exercise market power. However, this approach contains hidden assumptions about transaction costs. Parties made worse off by the exercise of market power can negotiate, bargain, form coalitions, and otherwise contract around the focal firm's attempts to appropriate monopoly profits-depending on transaction costs. We build on property rights economics to explain how transaction costs affect positioning and offer propositions about successful positioning in an environment with transaction costs.

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An economic model of strategic entrepreneurship

Westgren

Wuebker

2019

Strategic Entrepreneurship

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Research Summary How do new entrants create and capture value in established industries? Starting from the foundations of neoclassical economics, we model entrepreneurial entry and competition as occurring simultaneously in production technology space and product attribute space. Our model's central feature is to disaggregate entrepreneurial rents into four components: arbitrage, innovation, organization, and uncertainty‐bearing. This permits us to model the nature of value creation from a common analytical platform, and to measure value capture as a set of distinct rent streams available to multiple stakeholders over time. Managerial Summary Although there is broad consensus that the essence of entrepreneurship is the creation and capture of new value, both scholars and practitioners have struggled to connect this basic exhortation to the entrepreneurial process. This paper argues that returns to entrepreneurial action can be generated through four main mechanisms: innovation, uncertainty‐bearing, new business models, or inter‐industry arbitrage—either uniquely, or in combination. Examining these mechanisms for value creation together reveals implications for how best to organize and manage the entrepreneurial process so that that returns to entrepreneurial action can be appropriated equitably.

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Invited Editorial: The Four Theories of Profit and Their Joint Effects

Abstract: As a theory of profit, resource-based theory is focused on a single causal mechanism-competitive advantage. Although this focus has been useful in helping to

Cited by 101 publications

References 75 publications

The new normal: Market cooperation in the mobile payments ecosystem

The new normal: Market cooperation in the mobile payments ecosystem

Uncovering the hidden transaction costs of market power: A property rights approach to strategic positioning

An economic model of strategic entrepreneurship

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