The Economics of Strategic Opportunity

Given that firms are distinguished by the resources they command, and that those resources must in some ultimate sense have been acquired through purchase, how could it happen that the purchase prices are sufficiently favorable to support superior profitability (Barney, 1986)? Barney sets forth what might be called the ‘bad news’ about resource valuation: in general it is difficult to purchase things for less than they are worth. The interests of both the seller and rivals should stand in the way of such an accomplishment. This paper sets forth the good news about resource valuation: our stance is that ‘the good news is that the bad news is wrong’. (Or at least, the bad news is valid only within its proper sphere.)