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See discussions, stats, and author profiles for this publication at: http://www.researchgate.net/publication/229916347 The age of temporary advantage ARTICLE in STRATEGIC MANAGEMENT JOURNAL · DECEMBER 2010 Impact Factor: 3.78 · DOI: 10.1002/smj.897 CITATIONS 67 READS 1,099 3 AUTHORS: Richard A. D'Aveni Dartmouth College 25 PUBLICATIONS 1,920 CITATIONS SEE PROFILE Giovanni Battista Dagnino University of Catania 54 PUBLICATIONS 297 CITATIONS SEE PROFILE Ken G. Smith University of Maryland, College Park 67 PUBLICATIONS 6,161 CITATIONS SEE PROFILE Available from: Giovanni Battista Dagnino Retrieved on: 23 October 2015 Strategic Management Journal Strat. Mgmt. J., 31: 1371–1385 (2010) Published online EarlyView in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/smj.897 THE AGE OF TEMPORARY ADVANTAGE RICHARD A. D’AVENI,1* GIOVANNI BATTISTA DAGNINO,2 and KEN G. SMITH3 1 Tuck School of Business, Dartmouth College, Hanover, New Hampshire, U.S.A. 2 Department of Business Economics and Management, University of Catania, Catania, Italy 3 College of Business Administration, University of Rhode Island, Kingston, Rhode Island, U.S.A. The creation and management of temporary competitive advantages has emerged as an alter- native to sustainable models of competitive advantage in the strategy literature. We review the literature and discuss questions related to the antecedents, consequences and the management temporary advantage in the introduction of this special issue. The overall goal is to ask: What would the ﬁeld of strategic management look like if sustainable advantages did not exist? We summarize the papers published in this special issue and highlight directions for future research. Copyright 2010 John Wiley & Sons, Ltd. The goal of this special issue is to develop theory and empirical evidence about how organizations can successfully compete, evolve, and survive when ﬁrm-speciﬁc advantages are not sustainable or enduring, but more temporary in nature. Such conditions may exist due to fast-paced competi- tive actions and counter responses among rivals, or where frequent endogenous and exogenous com- petence destroying disruptions and discontinuities make sustaining one’s advantage impossible. The primary goal is to ask what the ﬁeld of strategy would look like if sustainable competitive advan- tage did not exist. Almost since the onset of strategic manage- ment scholarship, the ﬁeld has assumed that sus- tainable competitive advantage exists (Rumelt, Schendel, and Teece, 1994). Considerable effort has been dedicated to deﬁning and empirically Keywords: temporary competitive advantage; temporary advantage; hypercompetition; high velocity environments; competition; rivalry; strategic paradigms *Correspondence to: Richard A. D’Aveni, Tuck School of Busi- ness, Dartmouth University, 100 Tuck Hall, Hanover, N.H. 03755, U.S.A. E-mail: Richard.A.D’Aveni@tuck.dartmouth.edu demonstrating the existence of sustainable advan- tage. However, recent studies have begun to sug- gest that sustainable competitive advantage is rare and declining in duration (Rueﬂi and Wiggins, 2002). Other studies have found anecdotal and more rigorous empirical evidence of the concate- nation of temporary advantages (D’Aveni, 1994; Wiggins and Rueﬂi, 2005). And there is growing empirical evidence that the volatility of ﬁnancial returns is increasing, suggesting that the relative importance of the temporary (volatile) component of competitive advantage is rising when compared to the long run component of sustainable com- petitive advantage (Thomas and D’Aveni, 2009). Finally, there is increased attention to the eth- ical consequences of the sustainable advantages derived from monopoly positions and oligopolistic behavior (DeCelles, Donaldson, and Smith, 2007). Considerable thought has also been given to the idea that continuous strategy innovation is neces- sary in disruptive environments. The core argu- ment of this stream of enquiry is that the unremit- ting pursuit of strategic change is necessary for success, especially in nascent, emerging, high-tech, or other high velocity environments, where the Copyright 2010 John Wiley & Sons, Ltd. 1372 R. A. D’Aveni, G. B. Dagnino, and K. G. Smith structure and the rules of the game are unstable or erratic (Christensen, 1997; D’Aveni, 1994; Hamel, 2000; Markides, 1999). Interestingly, some argue that disruptive envi- ronments never reach maturity; they self-reproduce, cannibalize, innovate, and self- perpetuate by incessantly innovating, reviving, and reinitiating the initial stages of different waves of industry and product life cycles (Christensen, 1997). The authors in this research stream implic- itly suggest that sustainable advantage does not necessarily exist, except for saying that dynamic capabilities and organization ﬂexibility can occa- sionally be sources of sustainable advantage. Yet, there is no consistent body of evidence that dynamic capabilities are sustainable over extended periods of time and in different contexts, and there is some evidence that initiative fatigue or compla- cency and inertia undermine the sustainability of dynamic capabilities. Accordingly, ﬁrms can either become exhausted by continuous transformation and innovation or get complacent by success and turn out to be blinded and myopic to requisite environmental change (Audia, Locke, and Smith, 2000). The analysis of temporary advantage can be partitioned into three main parts: (1) causes or antecedents, (2) management of temporary advan- tages, and (3) consequences of temporary advantage. Antecedents of temporary advantage The increasing temporary nature of advantages has been attributed to numerous causes, including technological change, globalization, industry con- vergence, aggressive competitive behavior, dereg- ulation, the privatization movement stimulated by governments or hedge funds, government subsi- dies, the rise of China, India, and other emerging countries, the increase in availability of patient venture capital money, terrorism, global politi- cal instability, the pressure of short-term incen- tives for senior executives to produce results, etc. There is no evidence, however, about the real drivers of temporary competitive advantages and the increased volatility of returns. What are the endogenous antecedents of various kinds of temporary advantages? It would seem especially important to identify the extent to which a ﬁrm’s own decisions, competitive actions, and behaviors undermine its advantages and what motivates such behavior? What are the exogenous antecedents of various kinds of temporary advantage? In this regard, it would seem important to study the role of industry structure and industry boundaries. For example, how does the convergence of industries and competing business models from converging industries contribute to the erosion of advantages? Furthermore, how and why do different indus- try structures contribute to the speed of erosion? Finally, are controllable or uncontrollable causes more important? Answers to these questions are necessary to understand whether there are ways to slow the accelerating depreciation of advan- tages over time and which strategic solutions are possible. The management of temporary advantage As the environment becomes more dynamic and disruptive through both exogenous and endoge- nous changes, it perhaps becomes appropriate to deﬁne strategy as dynamic maneuvering—moves and counter moves—rather than static positioning, such as resources, routines, capabilities, generic strategy, industry structure, strategic groups, etc. (Grimm, Lee, and Smith, 2005). When such a view is taken, the value and duration of a move perhaps lasts only as long as rivals do not outma- neuver it. The literature on the delay or rapidity of competitive response ﬁnds that industry leaders are dethroned more frequently than is commonly believed (Ferrier, Smith, and Grimm, 1999; Smith, Ferrier, and Grimm, 2001), that more aggressive ﬁrms are more successful (Ferrier, 2001; Ferrier et al., 2002) and that Red Queen competition exists whereby rival actions cut into the performance of the acting ﬁrm requiring new action to keep pace (D’Aveni, 1994; Derfus et al., 2008). This perspective suggests that ﬁrms are incentivized to take a variety of different kinds of actions to actively destroy their own and the advantages of rivals. In fact, the vigorous pursuit of a series of temporary rents becomes the enticing strategy from this viewpoint. This recalls models of strat- egy eventually purporting that ﬁrms do not stick with just one advantage over their lifetime (Jacob- son, 1992; Mocciaro, Li Destri, and Dagnino, 2005). Such strategic behavior focuses on contin- uously matching the rapid evolution of the ﬁrm with a rapidly evolving environment, suggesting the relevance of the learning school (Mintzberg, Ahlstrand, and Lampel, 1998), which emphasizes Copyright 2010 John Wiley & Sons, Ltd. Strat. Mgmt. J., 31: 1371–1385 (2010) DOI: 10.1002/smj Special Issue Introduction 1373 how ﬁrms incorporate input from the environment and adapt over time. But is the capability of learn- ing a frequently observed phenomenon that yields sustainable advantage or does learning stop when ﬁrms learn a successful formula and turn it into an immutable paradigm? And, how should ﬁrms learn in conditions where prior advantages are quickly eroded? The learning literature suggests there is tension between top-down or theory-driven learn- ing based on accumulated experience over time versus bottom-up learning that is based more on the result of immediate action (Huber, 1991). There are also a number of important issues related to how ﬁrms transition from one advan- tage to the next. For example, how do ﬁrms manage the timing and transitions from one advan- tage to another as they learn? When should they begin these transitions? Should they plan for the next advantage prior to the erosion of an exist- ing advantage? How can ﬁrms avoid cannibal- ization of an existing advantage while creating a new advantage? Is there path dependence across a ﬁrm’s sequence of advantages or are the sequences truly unpredictable and responsive to unpredictable change? In sum, strategy in today’s environment is analogous to a marksman who is shooting at a moving uploads/Ingenierie_Lourd/ d-x27-aveni-dagnino-amp-smith-2010.pdf