Explaining Influence Rents: The Case for an Institutions-Based View of Strategy

50 Pages Posted: 30 Oct 2010

See all articles by Gautam Ahuja

Gautam Ahuja

University of Michigan, Stephen M. Ross School of Business

Sai Yayavaram

Indian Institute of Management (IIMB), Bangalore

Date Written: October 28, 2010

Abstract

Research in strategy has identified and tried to explain four types of rents: monopolistic rents, efficiency rents, quasi-rents, and Schumpeterian rents. Building on previous work on political and institutional strategies, we add a fifth type of rent, influence rents. Influence rents are the extra profits earned by a firm because the rules of the game (laws, regulations, and informal rules) are designed or changed to suit it. To aid the analysis of the relationship between institutional context and firm performance and to provide a structure to guide research, we develop a framework with five key components: a) an identification of the five fundamental problems of a market economy, b) a typology that describes the five different types of institutions that emerge to solve these problems, c) the market-ordering mechanisms used by institutions to solve these problems, d) the common causes of weak institutional performance, and e) generic strategies used by firms to exploit these weaknesses of an institutional context to enhance firm performance. We highlight potential applications of the framework as well as an illustrative research agenda that can advance the development of theory to explain the emergence and persistence of influence rents.

Keywords: institutions, influence rents, generic strategies

Suggested Citation

Ahuja, Gautam and Yayavaram, Sai, Explaining Influence Rents: The Case for an Institutions-Based View of Strategy (October 28, 2010). Available at SSRN: https://ssrn.com/abstract=1699459 or http://dx.doi.org/10.2139/ssrn.1699459

Gautam Ahuja (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Sai Yayavaram

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

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