The Dynamics of Resource Erosion

15 Pages Posted: 20 Jul 2013

See all articles by Ingemar Dierickx

Ingemar Dierickx

I. D. Consulting Limited

Karel Cool

INSEAD - Strategy

Luis Almeida Costa

Nova School of Business and Economics, Universidade Nova de Lisboa

Date Written: July 19, 2013

Abstract

The paper discusses patterns of resource erosion (alternatively called resource decay, leakage, depreciation). Taking a stocks-flows perspective, erosion is conceptualized as the loss of value per period (e.g. a year) of an asset stock (e.g. R&D capital, brand loyalty) as a consequence of a variety of mechanisms (e.g. R&D spill-overs, customers leaving, expiration of a patent). The paper discusses two patterns of erosion, linear and exponential, and explores their strategic implications. The paper also discusses some unexpected outcomes that may result from the combined effect of common growth and decay patterns, as well as additional difficulties that stem from inference lags.

Keywords: Resource Erosion, Resource Decay, Resource Leakage, Competitive Advantage, Asset Stocks, Stocks and Flows, Exponential Decay, Spillovers, Resource Imitation, Resource Complementarity, Success-Breeds-Success, Aggregate Stocks, Word-of-mouth

Suggested Citation

Dierickx, Ingemar and Cool, Karel and Costa, Luis Almeida, The Dynamics of Resource Erosion (July 19, 2013). INSEAD Working Paper No. 2013/87/ST. Available at SSRN: https://ssrn.com/abstract=2295904 or http://dx.doi.org/10.2139/ssrn.2295904

Ingemar Dierickx

I. D. Consulting Limited ( email )

C/- Duncan Cotterill, 1
Sir William Pickering Drive
Christchurch, 8053
New Zealand

Karel Cool (Contact Author)

INSEAD - Strategy ( email )

Boulevard de Constance
77305 Fontainebleau
France
(33) (0)1 60 72 42 76 (Phone)
(33) (0)1 60 74 55 58 (Fax)

Luis Almeida Costa

Nova School of Business and Economics, Universidade Nova de Lisboa ( email )

Lisbon
Portugal

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