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Abstract
Inimitability and non-substitutability make a competitive advantage sustainable; however, they can also have trade-offs between them. The more inimitable a resource is, the more competitors will feel pressure to substitute around it. At the same time, we do not know if this trade-off is dynamic or static, nor do we know the contingencies as to when this trade-off occurs. We study this paradox using a natural experiment – the Biologics Price Competition and Innovation Act of 2009. We find that the substitution paradox is dynamic, and it is also subject to important boundary conditions. While firm characteristics help determine whether there is a trade-off, resource characteristics are unaffected by the exogenous shock. These results support our hypotheses while drawing important implications about the applicability of the VRIN framework.
Published Version
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