Evidence on competitive advantage and superior stock market performance

This article analyzes the value‐relevance of industry‐based and resource‐based competitive advantage in a large sample of firms listed on the Oslo Stock Exchange. We measure competitive advantage by a single variable and perform a new decomposition into its underlying sources. In 1986–2005, the industry‐based and the resource‐based competitive advantage explain more than 20% of abnormal stock market returns, accumulated over 5 years. The resource‐based advantage is almost 4 times more important than the industry‐based advantage. Differences in both the return and the risk capability of firms' net assets relative to their industry peers are significant parts of the resource‐based advantage, estimated at 60 and 40%, respectively. Copyright © 2009 John Wiley & Sons, Ltd.