Competitive advantage in the online game industry in Taiwan

Purpose – Previous studies have suggested that one may trace the factors (i.e. sources of the competitive advantage) that cause the firm performance by examining the performance itself. Financial ratios have been used to trace the sources of competitive advantage, that is, the resource configuration, but the key resources driving superior performance remained undiscovered. The present study seeks to reduce the number of dimensions in the resource configuration to a two‐dimensional map to capture firms' relative resource positions and identify the resources and capabilities that lead to the superior performance. Design/methodology/approach – Factor analysis is used to extract the resource bundles and management capabilities of the online game industry in Taiwan from financial ratios included in the expanded Du Pont identity. These resource and capability bundles are subsequently verified by discriminant analysis to distinguish firms with competitive advantage from firms with competitive disadvantage. Factor scores are then used as inputs for multidimensional scaling to draw the resource positioning of the competitive firms. Findings – The competitive advantage of online firms can be determined using two dimensions of intellectual property and relationship assets. In addition, firms with advantage in upstream (game developers) and downstream (channels) relationships perform better than other firms. Research limitations/implications – Private online game firms are excluded from the empirical study because their financial data are not available. Originality/value – Using financial ratios, the present research identified the resource and capability bundles essential to the superior performance of the online game firms.