A Test of the Resource-Based Model Using Baseball Free Agents |
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Authors: | Laura Poppo Keith Weigelt |
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Institution: | Pamplin School of Business Virginia Tech Blacksburg, VA 24061;The Wharton School University of Pennsylvania Philadelphia, PA 19104 |
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Abstract: | This paper examines a nearly untested premise of the resource-based view of the firm: managers can exploit uncertainty about a factor's true value to generate returns. Our results show that empirically validating this basic proposition is difficult and potentially impossible, despite our use of a rather simple empirical setting. While market imperfections appear to underlie the payment of baseball free agents, we cannot easily determine whether this imperfection constitutes a return or not. In addition, while we find convincing evidence of uncertainty underlying owner's expectations of a free agent's performance potential, it is not clear whether team owners can exploit this uncertainty by amassing superior informational strategies or investing in complementary assets. Our difficulty in testing resource-based propositions suggests limitations to the theory's practicality. |
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