Knowledge, collaboration, and sustainable competitive advantage

Derivative Proposition 1.

Competitive advantage is a function of how one firm applies its operant resources to meet the needs of the customer relative to how another firm applies its operant resources.

Service per se is not the primary source of sustainable competitive advantage. As FP4 indicates, the only true source of sustainable competitive advantage is knowledge – the operant resources that make the service possible.

S-D logic, grounded in Hunt’s (2000) resource-advantage theory, recognizes that competitive advantage is derived from superior competences.

It is unrealistic for a firm to remain static in their value propositions or offered services; hence, service innovations are instrumental. These innovations are dependent upon the collection of competences, which the firm can continually renew, create, integrate, and transform. However, given the integrative nature of service provision, there is one competence that S-D logic recognizes as pivotal to any firm that wants to have sustained competitive advantage – collaborative competence – because it assists in the development of two additional meta-competences that we contend are critical in complex, dynamic, and turbulent environments:

  • Absorptive competence. The ability of an organization to be able to comprehend from the external environment the important trends and know-how. This will assist in transforming these external environments into important resources the firm can draw upon for support. Collaborative competency will aid a firm in absorbing new information and knowledge from partners or improve its absorptive competence.
  • Adaptive competence. The ability of an organization to adjust to changing circumstances. Once again, by developing collaborative competence the entity is able to use its partner firms as mechanisms for adapting to change brought about by complex and turbulent environments and, thus, improve its adaptive competence.

Better collaborative competency, coupled with improved absorptive competence and adaptive competence, can be used by organizations to lower its relative resource cost and enhance its relative value proposition. Lower relative resource costs focuses on efficiency and enhanced relative value focuses on effectiveness.

S-D logic suggests that the only possible way to offer more efficient and effective solutions to the marketplace is to have superior collaborative competency because it leverages the firm’s ability to absorb information and knowledge from the environment, customers, and its value networks and enables firms to adapt to dynamic and complex environments.

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