10 - Value analysis in strategy
Published online by Cambridge University Press: 05 June 2012
Summary
Economic value and the theory of the firm
Throughout this book we have explored the firm as a collection of heterogeneous resources whose role in society, its organizational boundaries, and its actual performance is inherently associated with the creation of economic value for customers and its capture by the firm's resources and owners. This perspective builds primarily from the resource-based view (RBV) and comparative cost-benefit analysis to understand how value creation and appropriation drive the main strategic decisions of the firm. Certainly, there are other economic and sociological approaches that can serve to study why firms exist and their role in society, but the analysis of economic value is particularly useful to investigate some of the fundamental issues in strategic management. We can now summarize what a value perspective can contribute to the key questions about the theory of the firm that we identified in chapter one.
What is a firm?
We have drawn from the conceptualization of the firm as a collection of tangible and intangible resources suggested by Edith Penrose and further expanded in the RBV. This concept of the firm can be refined to make it as useful as possible for strategy research and practice. Because we are specifically interested in strategic analysis, I suggested in chapter three that the administrative framework that constitutes a firm should be defined in terms of the reach of the strategy around the collection of resources that compete together versus other firms in the market.
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- Information
- Theory of the Firm for Strategic ManagementEconomic Value Analysis, pp. 246 - 266Publisher: Cambridge University PressPrint publication year: 2009