Unpacking the Temporary Nature of Competitive Advantage

Abstract

There is growing evidence within the strategy field that firms’ competitive advantage is becoming increasingly transient and that we are in an age of temporary competitive advantage. In this study, we unpack the drivers of temporary competitive advantage by exploring how it varies across different types of industry environments and firms. We characterize industry environments according to the degree of complexity and dynamism, and firms according to whether they are single-business or multi-business entities. We take an evolutionary perspective to studying the dynamics of competitive advantage and focus on the processes of innovation and imitation as shaping firms' performance over time. The empirical context for the study is the U.S. smartphone ecosystem. Consistent with our arguments, we find that application software (app) developers are more likely to sustain their competitive advantage in the Android ecosystem than in the simpler iOS ecosystem. Further, an increase in environmental dynamism, due to major changes in the hardware or the operating system, causes the competitive advantage to be more transitory. Finally, we find that multi-business firms are less likely to sustain their competitive advantage in the Android ecosystem than in the iOS ecosystem.