Managerial Foresight and Attempted Rent Appropriation: Insider Trading on Knowledge of Imminent Breakthroughs

Strategic Management Journal (26), 791-808, 2005

18 Pages Posted: 26 Jul 2012

See all articles by Gautam Ahuja

Gautam Ahuja

University of Michigan, Stephen M. Ross School of Business

Russell Wayne Coff

University of Wisconsin - Madison - School of Business

Peggy M. Lee

Arizona State University (ASU) - Management Department

Date Written: 2005

Abstract

In order to establish a competitive advantage, firms must acquire or create resources at a price below their value in use. Absent pure luck, this requires managers to exercise foresight about a resource’s future value and/or complementarities with pre-existing capabilities. This foresight grants managers the opportunity to exploit information asymmetries for personal gain as well as building organizational capabilities. Nevertheless, there is limited research on the extent of foresight or how managers use it. In our study of insider trading, we found that managers purchase stock well before breakthrough patents are filed. We argue for further research on the extent of managerial foresight and how it affects rent generation and appropriation.

Suggested Citation

Ahuja, Gautam and Coff, Russell Wayne and Lee, Peggy M., Managerial Foresight and Attempted Rent Appropriation: Insider Trading on Knowledge of Imminent Breakthroughs (2005). Strategic Management Journal (26), 791-808, 2005. Available at SSRN: https://ssrn.com/abstract=2117952

Gautam Ahuja

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

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Russell Wayne Coff (Contact Author)

University of Wisconsin - Madison - School of Business ( email )

975 University Avenue
Madison, WI 53706
United States

Peggy M. Lee

Arizona State University (ASU) - Management Department ( email )

Tempe, AZ 85287-4006
United States

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