Accumulating Competitive Advantage and Strategic Investment Volume 59- Issue 5

Jianan ZHANG*

• Kobe University Graduate School of Business Administration, Japan

Received: December 02, 2024; Published: December 11, 2024

*Corresponding author: Jianan ZHANG, Kobe University Graduate School of Business Administration, Japan

DOI: 10.26717/BJSTR.2024.59.009361

Abstract PDF

Competitive advantage discussed upon the theoretical background of business strategy is divided into practice-oriented approach (Porter [1]) and resource based view (Teece, et al. [2]). Practice-oriented competitive advantage is mainly supported by tangible assets, while resource-based competitive advantage is mainly supported by intangible assets. Among the orthodox theoretical system of competitive advantage, tangible assets can be exchanged by currency, while intangible assets cannot be exchanged through intermediate markets. At the same time, tangible assets has indispensability which means they are necessary to almost all business activities. From that point of view, accumulation of intangible assets needs tangible assets. Consequently, while elucidating and analyzing how competitive advantage is accumulated, the relevance and border between tangible and intangible assets is the key point. The fundamental difference between practice-oriented and resource-based competitive advantage is the way they are accumulated. Practice-oriented competitive advantage is theoretically supported by tangible assets which are able to be exchanged by currency. Resource-based competitive advantage is theoretically supported by intangible assets which are not able to be exchanged through intermediate markets. In order to accumulate intangible assets, companies need to organize and reorganize organizational intentions for a long time period (Teece, et al. [3-6]).

Consequently, the fundamental difference between practice-oriented and resource-based competitive advantage is whether they can be accumulated through strategic investment (Henderson, et al. [7,8]). Strategic investment is about the decisions of where to invest and how much to invest. The most important purpose of strategic investment is building profit centers. Capacity and capability exists upon the profit center portfolios of companies. The total deterrence (Porter [1]) of capability and capacity supports competitive advantage. In other words, deterrence makes competitive advantage works. Profit center portfolio is based upon intentions of strategic investment. Profit center is the consequence of strategic investment. Decisions about strategic investment is almost equivalent to the strategic directionality of a company. Which means the rationality of profit center portfolio decides if a company is able to maintain sustainable competitive advantage. Sustainable competitive advantage needs sustainable strategic investment. For that purpose, companies have to get finance from different routes. The interaction between different institutions and synergy of funding resources are important from that point of view.

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