According to Barney (2007, p. 52) “a firm has competitive advantage when it is able to create more economic value than the marginal firm in its industry.” But what is meant by marginal firm?
Here the marginal firm would mean any new entrant entering in the industry. Its entry gets justified on the basis of what was the EV of last entrant. The new entrant would have competitive advantage only when it produces better EV that the last entrant.
A firm is said to have a sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate this strategy. Such type of firm is called marginal firm by Barney (1991)
Marginal firm is the least profitable firm of the industry. Any increase in cost, this firm is the first to leave the industry.
Sven, simply apply the marginal utility concept of IO to the potential entrant into an existing market.
Sven, the word marginal in this case simply refers to breakeven. As stated in the linked article refering to marginal productivity: "An enterprise has a Competitive Advantage if it is able to create more economic value than the marginal (breakeven) competitor in its product market".
https://www.uclouvain.be/cps/ucl/doc/iag/documents/WP_110_Bridoux.pdf
- Badges
- Science topic
- Similar topics
- Econ
- Business Economics