What is economic value?

The question of what is value for individuals and overall society has been debated for centuries. It even has its own branch of philosophical inquiry, known as axiology. Unfortunately, the notion of value is hard to operationalize for empirical analysis because of the difficulties in defining a concept that is personal (varying across people), situational (context-specific), and comparative (involving preferences among objects and concepts). Given its subjectivity, difficult measurability, and noncomparability, the study of value itself could be regarded as unscientific.

However, the analysis of value creation and appropriation cannot be discarded so easily because it is the core of what firms do in our economy. Giving up is not an acceptable way to deal with the challenges presented by the analysis of value creation and appropriation by firms through their strategies. On the contrary, this book argues that the notion of value should rightly occupy a central place in the theory of the firm in strategy. Fortunately, we are only concerned with the economic value that emerges from market exchanges of products and services, which limits the analysis to only one type of value assessment of products or services that may be potentially exchanged for a given price in the market. Anything that cannot be exchanged in the market for a certain price is not considered in our analysis of economics.