The Competitive Advantage Period and the Industry Advantage Period

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Competitive advantages and superior performance can be interpreted as two sides of the same coin. With respect to management research, the first is mainly driven by strategic management whereas the second is a focal point in financial management. At the same time, industrial organization economics highlights the importance of industry characteristics to explain profit differences. Thomas Fritz presents a comprehensive review of empirical research on the creation of superior economic performance. He quantifies the competitive advantage period (CAP) and the industry advantage period (IAP) and determines the concrete sustainability of significant intra- and inter-industry performance differences. Based on the results for the CAP and IAP calculated for a sample of 6, 385 firms from 99 industries between 1980 and 2005, the author tests determinants that affect the sustainability of intra- and inter-industry performance differences. He shows that a certain sustainability of both competitive advantages and industry advantages is achieved. Finally, he identifies general as well as industry specific levers which increase the sustainability of competitive advantages.